From: OVERSEAS BUSINESS REPORTS (JAPAN)
University of Missouri-St. Louis
Match 19 DB Rec# - 29,018 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111108146
Title :JAPAN - DESTINATION JAPAN - OBR911200
Data type :TEXT
End year :1992
Date of record:09/15/1992
Keywords 1 :
| 9112
| CC588
| ECONOMY
| FINANCE
| INVESTMENT
| JAPAN
| MARKET|ASSESSMENT
| OBR
| OBR9112
| ZEC
Country :
| JAPAN
| ASIA
| EAP
| EAST ASIA
| EAST ASIA & PACIFIC
| EAST ASIAN COUNTRIES
| EAST ASIAN GROUP
| FAR EAST
| FAR EASTERN COUNTRIES
| FAR EASTERN GROUP
| OECD
| ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT
| ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMET
| PACIFIC
| PACIFIC RIM
| PACIFIC RIM COUNTRIES
| PACIFIC RIM GROUP
Text :
JAPAN - DESTINATION JAPAN - OBR911200
SUMMARY
Date: December 1991
Source: International Trade Administration, U.S. Dept. of Commerce
Country: Japan
Number of pages: 76
Subject: The report, titled "Destination Japan: A Business Guide for the
90s", discusses the economic and commercial climate in Japan, with emphasis
on information useful for potential U.S. sellers and investors. It includes
all information contained in Overseas Business Reports but is written in a
somewhat more direct style. The report consists of the following sections:
JAPAN COUNTRY FACT SHEET
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
THE JAPANESE ECONOMY
WHY EXPORT TO JAPAN?
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
MARKETING STRATEGY
BUSINESS CUSTOMS AND PRACTICES
BEST U.S. EXPORT PROSPECTS
JAPANESE GOVERNMENT PROCUREMENT
REGIONAL OUTLOOK OUTSIDE OF THE TOKYO AREA
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
INTELLECTUAL PROPERTY PROTECTION
EXPORT FINANCING
CUSTOMS CLEARANCE
TAXATION
THE STRUCUURAL IMPEDIMENTS INITIATIVE
FOREIGN TRADE BARRIERS
U.S.-JAPAN TRADE AND INVESTMENT
THE JAPANESE GOVERNMENT
JAPAN IMPORT PROMOTION MEASURES
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT PROMOTION INITIATIVE
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS
AND BUSINESS FACILITATION SERVICES FOR JAPAN
WHERE TO RECEIVE EXPORT COUNSELING
WHERE TO GET MARKET INFORMATION AND TRADE LEADS
GUIDANCE FOR BUSINESS TRAVELERS
RELEVANT PUBLICATIONS
ARE YOU READY TO EXPORT?
Destination Japan:
A Business Guide For The 90s
Prepared by
Eric Kennedy
Japan Export Information Center (JEIC)
With Contributions from
Cynthia Campbell, Cantwell Walsh, Edward Leslie,
Paul Judge, and Michelle Plante of the JEIC;
the U.S. & Foreign Commercial Service, Japan;
and the U.S. Patent and Trademark Office
U.S. DEPARTMENT OF COMMERCE
International Trade Administration
December 1991
TABLE OF CONTENTS
JAPAN COUNTRY FACT SHEET
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
THE JAPANESE ECONOMY
WHY EXPORT TO JAPAN?
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
MARKETING STRATEGY
Distribution and Sales Channels
Introducing Your Product to the Japanese Market
Choosing a Business Partner in Japan
Which is the Best Entry Mechanism for Your Company?
More Advanced Market Entry Alternatives
Establishing an Office in Japan
Licensing
Franchising
Direct Marketing
Pricing
Advertising
The Japanese Consumer
How to Please the Japanese Consumer
BUSINESS CUSTOMS AND PRACTICES
BEST U.S. EXPORT PROSPECTS
JAPANESE GOVERNMENT PROCUREMENT
REGIONAL OUTLOOK OUTSIDE OF THE TOKYO AREA
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
The American Chamber of Commerce in Japan
Keidanren
Keizai Doyu Kai
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
INTELLECTUAL PROPERTY PROTECTION
EXPORT FINANCING
Export-Import Bank of the United States
Foreign Credit Insurance Association
Small Business Administration
Overseas Private Investment Corporation
U.S. Department of Agriculture
Japanese Entities
CUSTOMS CLEARANCE
TAXATION
THE STRUCUURAL IMPEDIMENTS INITIATIVE
FOREIGN TRADE BARRIERS
U.S.-JAPAN TRADE AND INVESTMENT
THE JAPANESE GOVERNMENT
JAPAN IMPORT PROMOTION MEASURES
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT PROMOTION INITIATIVE
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS
AND BUSINESS FACILITATION SERVICES FOR JAPAN
WHERE TO RECEIVE EXPORT COUNSELING
WHERE TO GET MARKET INFORMATION AND TRADE LEADS
GUIDANCE FOR BUSINESS TRAVELERS
RELEVANT PUBLICATIONS
ARE YOU READY TO EXPORT?
JAPAN COUNTRY FACT SHEET
PROFILE:
A. Population: 123.61 million
B. Religions: Shintoism, Buddhism, Christianity 1 percent
C. Government: Type: Parliamentary Democracy
Head of Government: Prime Minister Kiichi Miyazawa
D. Language: Japanese
ECONOMY: 1988 1989 1990
A. GNP ($B, Nominal) 2,916 2,890 2,964
B. GNP Growth Rate (real, 1985 base) 6.2 4.7 5.6
C. GNP per capita (in dollars) 23,750 23,448 23,971
D. Gov't spending as a percent of GNP 15.8 15.6 15.4
E. Inflation (CPI, 1985 base, percent) 0.7 2.3 3.1
F. Unemployment (percent) 2.5 2.3 2.1
G. Foreign Exchange Reserves ($B) 97.7 84.9 77.1
H. Average Exchange Rate ($1=) 128.15 137.96 144.79
I. U.S. Economic Assistance 0 0 0
J. Output/hour manufacturing (1985=100) 90.7 92.8 94.6
K. Domestic Demand (percent growth) 7.6 5.9 5.8
L. Household Savings Rate (percent) 14.3 14.1 13.8
TRADE:
A. Total Japanese Exports ($M) 265,917 275,175 286,948
B. Total Japanese Imports ($M) 187,354 210,847 234,799
C. Total U.S. Exports (FAS value, $M) 322,426 363,812 393,893
D. Total U.S. Imports (customs val. $M) 440,952 473,211 494,903
E. U.S. Exports to Japan (FAS, $M) 37,725 44,494 48,585
F. U.S. Imports fm Jpn (customs val. $M) 89,519 93,553 89,655
Principal U.S. Exports: automatic data processing machines and office
equipment; wood, in the rough or roughly squared; aircraft, spacecraft,
and associated equipment; seafood products; semiconductors and other
electronic components
Principal U.S. Imports: motor cars and other motor vehicles, automatic
data processing machines and office equipment, parts and accessories of
motor vehicles, scientific optical equipment, and semiconductors and
other electronic components
Best U.S. Export Prospects: Pharmaceuticals, telecommunication
services, marine fishery products, biotechnology products, medical
equipment and supplies, industrial chemicals, aircraft and parts,
architectural/engineering/construction services, sporting goods,
computer software and services, and building products.
Foreign Supplier Share of Japanese Imports in 1990:
1. S.E. Asia: 23.3% 4. Middle East: 13.2%
2. U.S.: 22.4% 5. Indonesia: 5.4%
3. E.C.: 14.9% 6. Australia: 5.3%
BOP Current Account Balance: 1989: $57.16 billion
1990: $35.79 billion
Trade Balances with Leading Partners, 1990 ($B):
1. U.S.: 41.07
2. S.E. Asia:28.12
3. E.C. (including the Federal Republic of Germany): 18.49
4. Federal Republic of Germany: 6.30
5. Republic of Korea: 5.75
6. Middle East: -21.46
IMPORT POLICY:
1. Tariffs: The average Japanese tariff is low, but on specific items,
particularly foodstuffs and leather goods, both tariffs and quotas are
trade restrictive. Japan has recently eliminated the import quotas on
beef and citrus, as well as the quotas on many processed foods.
2. Taxes: Since April 1, 1989, the commodity tax has been replaced with a
general consumption tax of 3 percent, 6 percent on autos, which is
levied on the c.i.f. plus duty value.
3. Licensing of Technology: Until recently, a report had to be filed with
the Ministry of Finance and other competent ministries through the Bank
of Japan before signing a licensing contract. In practice, the investor
was notified that the Japanese Government had no objection within one
hour following notification, if the proposed investment was in
unrestricted industries. However, as part of the U.S.-Japan Structural
Impediments Initiative Agreement, this prior notification requirement
has been replaced by ex post facto notification for investment in
unrestricted sectors. More stringent regulations apply to "designated
technologies" which have been determined to have significant influence
on the security of the nation and the national economy.
INVESTMENT:
Foreign Ownership Restrictions: A 100 percent foreign capital is
allowed in principle except for the following sectors: broadcasting;
telecommunications; electric power generation; domestic rail and air
transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security
guard services; agriculture, forestry, and fisheries; petroleum refining
and marketing; leather and leather product manufacturing; and mining.
Total U.S. Direct Investment in Japan (cumulative): 1988 $16.9 billion,
1989 $18.5 billion, 1990 $20.9 billion.
Principal Foreign Investment Sectors in Japan (1950-1989): Machinery,
chemical, commerce/foreign trade, services, real estate, petroleum,
banking/insurance, and metals.
U.S. Share of Foreign Direct Investment in Japan: 50.5 percent (as of
March 31, 1990)
Principal Foreign Investors in Japan (JFY 1989): United States, the
Netherlands, Federal Republic of Germany, Switzerland, United Kingdom,
and Hong Kong.
Japan's Foreign Direct Investment in U.S. (cumulative): 1988 $53.4
billion, 1989 $67.3 billion, 1990 $83.5 billion.
FOREIGN TRADE OUTLOOK -- ECONOMIC OVERVIEW
The Japanese economy continues to experience success despite the recession
in the United States. Since 1987, Japan has enjoyed strong economic growth,
highlighted by low inflation and unemployment and led by strong domestic
rather than external demand. The real GNP growth rate in 1990 was 5.6
percent. Japanese monetary policy played an important role through 1989 in
sustaining expansion of Japanese domestic demand, while falling import
prices and a measure of deregulation kept inflation at bay. Troubled stocks
and more stringent monetary policy have not yet dampened perceptibly the
strong growth in all components of domestic demand, except housing. Consumer
spending and corporate investment are the mainstays of the current boom.
More and more U.S. companies are realizing that the best way to respond to
Japanese competition at home and in world markets is to become involved in
the Japanese market. Not only is Japan the world's second largest economy
($2.96 trillion) after the United States, it is the largest economy in Asia
and the second largest market for U.S. exports after Canada. Japan has a
highly educated and efficient labor force, a stable government, an economy
driven by high levels of household savings and capital investment, a huge
and growing domestic market, and continuing growth exceeding that of the
United States. Not only are there opportunities for U.S. companies in the
Japanese market, but market entry into Japan should be a vital part of any
company's international marketing strategy.
Over the next several years, Japan will offer many new business
opportunities -- in infrastructure build-up, as the tremendous economic
growth has brought a need for airports, roads, bridges, and housing; in
leisure, as the Japanese worker finds more time and money to spend off the
job; in retirement communities and health care with the "graying" of
Japanese society; in changing and broadening consumer tastes, as the average
Japanese consumer has become more cosmopolitan with greater exposure to
foreign products; and in Japan's large Official Development Assistance (ODA)
projects.
THE JAPANESE ECONOMY
The Japanese economy, rebuilt from post-Second World War ruins, was the
world's second largest economy in 1990. Persistently huge external trade
imbalances have evoked steadily mounting international economic and
political pressures on Japan to adopt policies that accelerate structural
adjustment. Frustrated trading partners point out that Japan is also home
to inefficient transport, agricultural, construction, and distribution
sectors which are sheltered from foreign competition. Transition to greater
competition in these sectors is under way -- too slow to satisfy trading
partners, but remarkably rapid in Japanese eyes.
Imports into Japan are increasing, and the share of imported manufactured
goods has risen from about 20 percent in 1982 to about 48 percent in 1990
(SITC categories 5-8). Japanese external balances, after a four-year upward
spiral, declined in yen terms in 1987, and in dollar terms since 1988.
Following Japan's reversal of its easy monetary policy in late 1989, a climb
in interest rates brought capital costs from historic lows to levels more
comparable with those in the United States. Together with a change in
expectations of earnings, the higher interest rates prompted reduced net
capital outflows from Japan. Japanese monetary policy tightening coincided
with two distinct periods of broad equity market depreciation, the first in
the early spring of 1990 and the latter following the Iraqi invasion of
Kuwait in August 1990.
Japan has pursued relatively tight fiscal policies since 1982 to constrain
growth in government debt, which had expanded to about 35 percent of nominal
Gross National Product (GNP) in that year. However, under pressure from
other Group of Seven (G-7) countries to contribute to the reduction of
international imbalances, the Japanese Government in June 1987 initiated a
$35 billion multisector public works spending package and followed up with
tax cuts worth about $10 billion. Building on economic growth which began
late in 1986, the package helped to reduce fiscal drag on the economy. In
the June 1990 report on the U.S.-Japan Structural Impediments Initiative
(SII) Agreement, the Japanese Government agreed to formulate a ten-year plan
to boost social infrastructure spending significantly.
In cooperation with the United States, Japan is playing a leading role in
increasing Official Development Assistance (ODA) flows, and became the
world's largest donor in 1990. Japan has committed to double ODA to at
least $50 billion over the five-year period from 1988 to 1992 and to improve
the quality of that aid by boosting the share of grant and untied aid.
Japan ended most foreign exchange controls in the 1970s, culminating in a
major simplification of the Foreign Exchange and Foreign Trade Control Law
in 1980. Currently, pursuant to the international understanding launched
under the 1985 Plaza Accord and refined since then, Japan actively
coordinates economic policies with the United States and its other G-7
partners. The appreciation of the yen since 1985 has increased the price
competitiveness of American products and is contributing to the reduction of
Japan's enormous external trade imbalances. At this point, although import
price reductions have had some impact in moderating domestic price levels,
there remains room for further improvement in terms of benefits for
consumers. This situation could stimulate additional demand for imports.
WHY EXPORT TO JAPAN?
You have heard about the great market potential in Japan for goods and
services. There are three basic reasons why your firm's products and
services should be in the Japanese market.
First, Japanese consumers, both individual and corporate, are spending in
record amounts. This recent phenomenon is in addition to the high levels of
capital investment and research and development (R&D) outlays of the private
business sector, and continues to fuel Japan's economic growth. Already,
many European and Asian competitors are pursuing this trend and have come to
Japan in force.
Second, there is a massive infrastructure buildup under way in Japan as it
strides into the 21st century. Trillions of dollars are to be spent on
airports, bridges, roads, port development projects, heliports, buildings,
telecommunications systems, resorts, retirement communities, marinas,
conference centers, and medical and science cities. Furthermore, the U.S.
Government has negotiated an agreement with the Japanese Government to
ensure more opportunities for American firms in the Japanese construction
market.
Third, entering the Japanese market should be regarded as an indispensable
part of the global strategy of your business -- and without a global
strategy, it will be very difficult to remain competitive in your domestic
market over the long term. Your firm should be in Japan (1) at a minimum,
to gather information on the Japanese competition and new Japanese
technology; (2) to exploit the growing Japanese market; (3) to compete with
your Japanese competition in Japan, thereby enhancing your competitiveness
and your market share ultimately in the United States; and (4) to establish
relationships with Japanese business and government entities to enable your
company to work in Japanese-financed development projects in third
countries. Japan's Official Development Assistance (ODA) program is now one
of the world's largest providers of U.S. Agency for International
Development (AID)-type grants and loans. Finally, experience gained in
Japan responding to the severe demands of Japanese customers can result in
improvements to your products made and sold throughout the world. The
observation that if a company can sell in Japan, it can sell anywhere, is
basically true.
YES, THERE ARE DIFFICULTIES, BUT THEY CAN BE OVERCOME!
So you have heard about great opportunities in Japan and its necessary role
in your firm's international marketing strategy. You have also been warned
of the great difficulties your firm will face. You have been told that your
goods may be treated unfairly, that you will have to adapt your product to
the Japanese market, and that the distribution system in Japan is too
mysterious and complex. Beyond these problems, you recognize that you will
face impenetrable cultural barriers. However, only some of this is true to a
limited degree, and these perceptions should not deter you from taking
advantage of one of the world's largest and richest markets.
Unquestionably, Japan is a difficult market to crack and, as in most
countries, there are cases of protectionism. Nevertheless, Japan is not the
"closed market" of even a decade ago. There are now very few formal
barriers to trade in the form of quotas and tariffs. For those who have a
quality product and are willing to undertake the high cost of initial market
entry in the world's most expensive country, it is possible to achieve a
substantial market share and to make significant profits. The regulatory
system is still complex, but the Japanese Government has substantially
removed the legal and administrative restrictions on imports and foreign
investment in Japan that traditionally made doing business there difficult
for U.S. businesses. In fact, the Japanese Government has shifted its
position towards encouraging imports and promoting investment. However,
some knotty regulatory barriers and discrimination do still exist. When a
company cannot solve such problems independently or through legal advisers
in Japan, the U.S. Government, and particularly the U.S. Department of
Commerce, can often provide assistance. U.S. companies should not be afraid
of retaliation by the Japanese bureaucracy for seeking fairness and
transparency in Japanese administrative regulations. There are
difficulties, but upon closer inspection, they are not as formidable as they
first appear. With a little hard work, they can usually be overcome. Many
U.S. firms now realize that they can no longer afford not to make a
commitment to the Japanese market. The ultimate benefits of getting
established in one of the world's largest, most advanced, and dynamic
economies, more than repay the initial effort and long-term commitment.
MARKETING STRATEGY
The key to your success in Japan is the commitment of your resources --
including your time, money, and personnel -- to develop a market for the
long term. If you prepare well, exercise patience, and demonstrate
commitment, then you will likely reap substantial benefits from your
efforts. There are six key points that every American firm wishing to do
well in Japan must know, understand, and remember before entering the market:
Product: The acceptance of your product in the Japanese market is based
primarily on its quality and after-sales service, not its price (although
this is still an important consideration). Your product may sell well in
the United States and other countries, but that does not mean it will be
well received in Japan. The Japanese are the most discriminating shoppers
in the world. The Japanese are very quality-conscious. Strict delivery
dates must be met. Customer-oriented service is a decisive factor. The
Japanese consumer looks for innovation in technology, design, style, and
fashion. Both your product and corporate image are critically important.
Preparation: Substantial preparatory homework is required. You must make
an effort to know the market for your product and your potential competition
in that market. You must carefully monitor the activities of Japanese
competitors and Japanese Government regulations and development programs.
Furthermore, you must be ready and willing to modify your product to meet
local marketing requirements. This modification would include metrification
of products, manuals, and sales literature. These steps may be necessary in
order to meet some regulatory condition or simply to conform to the personal
preferences of the Japanese consumer or end-user. Your firm would do no
less when selling in the United States. You should have all relevant
product literature translated into Japanese. This may prove expensive, but
it is necessary.
Presence: In almost every case, you MUST have a presence in the Japanese
market if your firm is to succeed. This can be in the form
of a representative -- an individual or organization that serves as a
middleman representing you and your product, or an actual physical presence
by your firm -- a liaison or branch office, subsidiary, or joint venture.
Whichever option you choose, a presence is absolutely essential. Your firm
needs someone in Japan to advertise your product, take orders, resolve
potential delivery problems or bottlenecks on the Japanese side, work with
distributors, replace defective or broken goods, and implement after-sales
service. You need someone to physically import the product, to arrange
payment, and to keep you informed of what is happening. This last point is
often neglected by exporters. Products come and go in Japan. What is an
advanced product or in fashion today can be outmoded and unfashionable
tomorrow. Your firm must be continuously kept aware of market trends and
product developments in Japan to remain competitive.
Culture: An understanding of the Japanese business mentality and a
willingness to accommodate Japanese consumer preferences are extremely
important. Simply put, learn about Japan -- about its culture, history, and
business practices. One of the most common mistakes American firms make in
Japan is that they do not listen to their people in Japan. It is wise to
listen to your Japanese representative when he or she makes a suggestion.
Your representative is in the best position to know what is going on in
Japan, and therefore, to recommend the best course of action. Demonstrate
prudence, but do not disregard the comments or suggestions made by your
representative in Japan. A lack of responsiveness by you may result in an
arriving shipment not being cleared through customs or poor sales.
Education: Many products from the United States fit into a cultural or an
industrial environment that may not currently exist in Japan. This
uniqueness is what often gives U.S. products the edge. However, you often
must educate your customers about the product's purpose, use, and quality.
Patience: Entering the Japanese market requires a long-term approach;
negotiations are likely to be lengthy, initial costs are high, and returns
may be slow in reaching profitable levels. Do not expect immediate
results. Only by exercising patience will you succeed. A number of firms
have failed in Japan only because they lacked a sustained commitment and
prematurely withdrew from the market.
Distribution and Sales Channels
The Japanese distribution system is very different from our own; it is as
inefficient as it is complex. There are two basic methods of distribution
for potential exporters to Japan. One is to use the existing distribution
channels of a trading company, manufacturer, or wholesaler. The other is to
set up your own distribution system -- which could be very expensive
initially, but more efficient over the long term. The decision as to which
approach to follow must be based on an assessment of product
characteristics, the potential market size, the structure of the market
(buyer universe), the degree of complexity of the existing distribution
channels, and your firm's resources, as well as your willingness and ability
to commit them to the development of the Japanese market.
If the market is one in which there is a large number of smaller end-users
located throughout the country, it may be necessary to rely on a network of
wholesalers. Where the buyer universe is relatively concentrated among a
limited number of large firms, marketing may be direct or through a single
intermediary. A key factor for you is to answer the question, "Who has
control over the channels of distribution which provide access to my
market?" Your firm must understand existing distribution channels in order
to utilize them or develop an innovative approach. To reach your potential
customers, you may have to rely on a trading company or wholesaler who
controls related distribution channels for your product.
Japanese distribution practices are often markedly different from those in
the United States. Multiple layers of middlemen may be involved in a system
of highly institutionalized marketing channels linking producers, retailers,
and end-users. Wholesalers and retailers in Japan significantly outnumber
their counterparts in the United States. Many elements of the distribution
system have fewer than ten employees, cannot provide their own credit or
maintain large inventories, and often have financial, ownership, or
exclusive arrangements with major Japanese manufacturers, industrial groups,
or trading companies. Distribution channels in Japan vary considerably from
industry to industry and product to product with particular differences
between consumer and industrial goods.
In some capital goods sectors, Japan has a number of small firms which
function as subcontractors for larger manufacturers. Small and medium-sized
firms, employing fewer than 300 persons, supply the majority of
manufacturing industries with most of their products. To sell to these
firms, it is often necessary to follow a multilayered distribution system.
You need to determine the identity, locations, and needs of your customers
before choosing the distribution channel. Your representative can be of
tremendous aid in identifying and accessing the proper distribution channel.
Introducing Your Product to the Japanese Market
The first move your company must make before entering the Japanese market is
to determine whether or not there is in fact a market for your product.
Second, you must have a market strategy. The Japanese customer is the most
demanding in the world. Poor quality, inferior packaging, and second-rate
customer service will not be tolerated. In addition, when doing business in
Japan, what is considered unnecessary fluff in most countries is vital for
the success of your company. You are trying to sell more than your product
to the Japanese. Your company's image, reputation, and reliability are
critically important. The Japanese insist on knowing your company's
history, goals, and vision for success. Perception and image are everything
in Japan. The more information they know about you and your company, the
more comfortable they will be in dealing with you. Communication is vital.
Your potential Japanese agent/distributor/representative must be reassured
that you are making a permanent commitment to the Japanese market. If you
have not convinced him or her of your seriousness, your product will receive
minimal consideration.
You should designate a manager who is responsible for Japan operations.
Ideally, the Japan portfolio should be the manager's sole responsibility;
and if not resident in Japan, he or she should visit Japan at least four
times a year. In addition, when selling the product, a company
representative who knows the product should be in Japan to answer specific
technical questions or hold seminars and conferences. Too often, when a
potential Japanese customer asks a technical question about a U.S. product,
the American company's marketing representative cannot answer the question.
Providing an informational brochure in Japanese is a good beginning, but
quite often it is not enough. The inability of your sales representative in
Japan to answer technical questions about the product indicates to your
potential customers a lack of pride in your product. They will take their
business elsewhere.
The Japanese often praise the innovative design, technology, and creativity
of American products. However, many times they are critical of the low
quality of the product or the reluctance of American companies to alter
their product to meet Japanese consumer tastes. Japanese consumers will
carefully examine the stitching of clothing and will notice if the color
fades when washed. If they detect a flaw, they are unlikely to purchase the
product. American companies cannot stand pat in the Japanese market
either. Too often, an American company will have a good product that
captures Japanese interest, but the company does not continue to develop or
modify the product to meet the specific needs of the Japanese consumer.
Meanwhile, Japanese and Asian competitors will take the product, copy it,
and improve it -- offering it at a cheaper price.
The type of product that you are interested in exporting to Japan will
largely dictate the direction you will take. Listed below are a few
suggestions on how to expose your product to the Japanese market. Please
note, and this is of the utmost importance to succeed in Japan, that your
goal here is to introduce yourself to your potential Japanese counterpart --
your partner, if you will. This partner is the organization, company, or
person with whom you, the exporter, will work. Your partner's role in this
arrangement is to introduce and sell your merchandise to the Japanese
consumer or end-user. However, your cooperation, attention to detail, and
involvement are the primary conditions for their success, and yours.
The Agent/Distributor Service: The U.S. Department of Commerce offers the
Agent/Distributor Service (ADS) which is an overseas search to identify
potential representatives for your product in the Japanese market. U.S.
commercial officers in Japan prepare a list identifying up to six Japanese
prospects who have expressed an interest in representing you in the market.
Since the processing time at the U.S. Embassy ranges from 30 to 45 days, you
should allow for sufficient lead time. An additional benefit from this
service is that the U.S. Government is introducing your firm to a potential
Japanese partner. Proper introductions by third parties are an integral
part of doing business in Japan, and many Japanese firms are reluctant to do
business without an appropriate introduction. When filing for the ADS, you
should give as much information as possible about what is unique or
different about your product. Information on your company's function,
history, and goals is equally important. The ADS does not include a search
for a licensee or joint venture partner. Contact your local U.S. Department
of Commerce district office for more information on the ADS.
The Comparison Shopping Service and Market Research: The Comparison
Shopping Service (CSS) is a more comprehensive service for those companies
which are prepared to make a more serious initial commitment to the Japanese
market. The CSS is a custom market research service designed to help firms
such as yours get the precise information you need to assess a given export
market. The CSS can provide key marketing facts about your specific product
which cannot be found in broader industry surveys.
The CSS provides answers to nine key marketing questions about your product
in Japan: (1) Does the product have sales potential in the market? (2) Who
is supplying a comparable product locally? (3) What is the usual sales
channel for getting this type of product into the market? (4) What is the
going price for a comparable product in this market? (5) Are purchasers of
such products primarily influenced by price or other competitive factors,
such as credit, quality, delivery, service, promotion, brand, etc.? (6) What
is the best way to get sales exposure in the market for this type of
product? (7) Are there any impediments to selling this type of product in
this market, such as quotas, duties, or local regulations that might impede
sales? (8) Who might be interested and qualified to represent or purchase
this company's product in the market? and (9) If a licensing or joint
venture strategy seems desirable for this market, who might be an interested
and qualified partner for the U.S. company?
Answers to these questions are obtained from on-the-spot, personal
interviews conducted by private sector market research firms in Japan. The
researchers conduct a CSS survey by interviewing knowledgeable local
sources, such as importers, distributors, end-users, or local producers of
comparable products. The final CSS survey will be completed and sent to you
in approximately 60 days. For further information, contact your nearest
U.S. Department of Commerce district office.
There are many industry subsector analysis reports that have been written by
the U.S. and Foreign Commercial Service of the U.S. Department of Commerce
and Japan External Trade Organization (JETRO). For a list of market
research reports available, contact the Japan Export Information Center
(JEIC) at (202) 377-2425. In addition, if your firm wishes to contract for
more detailed market research, contact the JEIC to obtain a list of market
research and business consulting firms in Japan.
Trade Shows/Missions: These events offer excellent opportunities to
introduce your product to the market, expose your company and products to a
large number of potential customers, enhance and build your company's image,
educate the market about your products, learn about the needs and
expectations of the customer, and learn about the competition. The U.S.
Department of Commerce regularly schedules showings of American products and
invites interested Japanese buyers to attend. For more information, contact
your local U.S. Department of Commerce district office or the U.S.
Department of Commerce's Japan Export Information Center (JEIC). The
various types of trade shows include the following:
Trade Events: Overseas promotions that are organized and recruited by the
U.S. Department of Commerce. The shows are industry specific and are of
usually two types. Solo Exhibits are shows which are initiated and staged
by the Commerce Department and which feature only U.S. exhibitors and their
products. International Trade Fairs are shows in which the Commerce
Department establishes a U.S. section or pavilion, featuring U.S. products
and exhibitors. Cost of participation in trade shows vary, but for
companies that have the resources, trade missions can be one of the most
cost effective ways of developing an export market. For more information,
contact the Office of International Operations at (202) 377-8422.
Matchmaker Trade Delegations: Overseas sales promotion trips arranged and
recruited by the Commerce Department. Matchmakers are week-long, industry
specific trade delegations. They are often planned in conjunction with a
recognized international trade fair. Commercial specialists at the U.S.
Embassy in Japan match American suppliers in one-on-one in interviews with
potential agents, distributors, and/or joint venture or licensee partners --
depending on the market penetration strategy of the U.S. firm. Mission
members are responsible for their own expenses and a contribution to defray
general mission expenses. For more information, contact the Office of
Marketing Programs at (202) 377-4231.
Foreign Buyer Program: Trade missions of Japanese buyers who visit U.S.
domestic sales promotion events arranged and recruited by the Commerce
Department. Foreign Buyer Shows present a broad range of products and
services with good prospects for increased international sales. For more
information, contact Export Promotion Services at (202) 377-0871.
State Representative Offices in Japan: Thirty-eight U.S. states have their
own representative office in Japan. These offices are designed to promote
exports from and encourage investment in their respective states. You
should contact your state government in order to determine what assistance
it can provide you. For a list of state representative offices in Japan,
contact the Japan Export Information Center at (202) 377-2425.
Industry Trade Associations: You should contact your trade association for
information on exporting to Japan. U.S. trade associations often have
international departments or affiliations which can provide information on
marketing; testing, standards, and certification; and intellectual property
protection. Members of the association serve as excellent sources of
information and may be able to introduce your company to a potential partner
in Japan. Also, your association may have a good working relationship with
a counterpart association or office in Japan. Some U.S. industry
associations with offices in Japan include the American Electronics
Association, the Motion Picture Association of America, Inc., the
Pharmaceutical Manufacturers Association, the U.S. Semiconductor Industry
Association, the U.S. Electronics Industry, and the U.S. Automotive Parts
Industry.
Export Trading/Management Companies: Trading and management companies are
trade intermediaries or middlemen that provide clients with a variety of
export trade services. Each trading company is unique in the combination of
services it offers and the products it handles. Some trade intermediaries
deal in a wide range of trade facilitation services while others specialize
in a few. Such services can include, for example, advertising and promotion;
consolidation of the shipments of a number of suppliers to lower freight
rates; supplying freight forwarding and international documentation; finding
suitable distributors and interested overseas buyers; providing credit
checks on overseas traders and buyers; market research; translation; and
taking title of the goods. Available through U.S. Department of Commerce
district offices is a publication titled Export Yellow Pages that lists
contact information on 1,000 U.S. export trading companies. The choice
between using a Japanese or an American sales agent/distributor should be
based on informed knowledge of the market.
Japan has more than 6,000 trading companies. Japanese trading companies
include many small, specialized firms "senmon shosha" that represent the
primary Japanese equivalent to U.S. trade intermediaries. Japanese trading
companies also include general trading companies, "sogo shosha," that
represent the vanguard of the Japanese economy. The sogo shosha account for
50 percent of Japan's exports and 60 percent of imports. The nine largest
Japanese sogo shosha have a combined annual sales volume of about $700
billion. For the year ending March 1989, the Mitsui sogo shosha alone had
$126 billion in trade transactions.
Sogo shosha are organized along industry lines, not along geographical
lines. Each sogo shosha is part of a large industrial conglomerate
("keiretsu") centered around a major bank. Most have manufacturing
subsidiaries or affiliates and serve as conduits for technology transfer
through licensing agreements negotiated for their manufacturing
subsidiaries. Sogo shosha deal with a multitude of products -- Mitsui, for
example, handles as many as 20,000 different items.
Sogo shosha act as trade intermediaries between buyers and sellers at all
stages of product and trade flow -- from upstream raw material extraction,
through production, to downstream distribution to the end-user. The sogo
shosha search for volume growth in value-added, bulk commodity products.
They are willing to play whatever role is necessary to make the project or
transaction work -- trade catalyst, joint partner, consortia organizer, and
support of major project management. Sogo shosha have vast communication
networks and have an extensive presence in foreign markets. For example,
one sogo shosha has 190 offices worldwide with 20 in the United States alone.
It is not unusual that 60-70 percent of a sogo shosha's assets are committed
to financing suppliers and customers. Sogo shosha derive financial strength
from their keiretsu's bank (often a major stockholder). Bank loans are used
to acquire or establish firms to obtain a production base or enter resource
development. The sogo shosha also reloan funds to clients. In 1987, the
sogo shosha provided over $26 billion in trade credits and $47 billion in
long-term loans and credit guarantees.
Sogo shosha tend to handle bulk items such as agricultural products,
industrial materials, and textiles. In the case of a product other than a
bulk commodity or raw material, the use of a specialized trading company or
senmon shosha should be considered. These smaller firms limit themselves to
a narrow range of products and handle most phases of the product's journey
through customs to the end-user. They often can provide greater assistance
for products which require after-sales service such as electronic
instruments and medical equipment.
The third distinctive type of trading company is the "captive" type, which
is owned by manufacturers or merchandisers. It performs foreign trade
functions for particular manufacturers and is primarily of interest to firms
that wish to export to their parent companies.
Japan's general trading companies have established an Export Promotion
Office for U.S. Manufactured Goods to advise American companies interested
in trading with Japan and other foreign countries. The companies' trade
experts are located at 105 offices in 19 U.S. cities. These offices are
linked individually by a computer system that can give manufacturers and
exporters information on markets, financing, laws, regulations, exchange
rates, and other factors with a bearing on trading decisions. For a list of
these offices in the United States, contact the Japan Export Information
Center (JEIC) of the U.S. Department of Commerce at (202) 377-2425.
Japan Chamber of Commerce and Industry: The Japan Chamber of Commerce and
Industry (JCCI) offers manufacturing directories, phone numbers, contacts,
and lists to help a U.S. company find the most appropriate partner in Japan
for a joint venture or product distribution. In addition, many of the
regional chambers of commerce and industry in Japan publish trade
opportunities or bulletins with foreign products and companies listed.
Since 1984, the JCCI has had an office in Kansas City, Missouri which can
advise your company about opportunities in the Japanese market and provide
information on Japanese companies interested in possibly doing business with
your firm. The Osaka Chamber of Commerce and Industry (OCCI) and several
municipal and business groups sponsor the annual Global Opportunities
Convention (G-BOC), which is held in Osaka, Japan. G-BOC provides an
excellent opportunity for your company to be introduced to potential
Japanese business partners. American companies can contact the JCCI for
additional information on G-BOC. JCCI contact points are located at:
JCCI JCCI
Commerce Tower Suite 2323 2-2 Marunouchi 3-chome
911 Main Street Chiyoda-ku, Tokyo 100
Kansas City, MO 64105 Japan
Phone: (816) 221-6140 Phone: 011-81-3-3283-7660
Fax: (816) 471-6523 Fax: 011-81-3-3216-6497
OCCI
2-8 Hommachibashi
Chuo-ku, Osaka 540
Japan
Phone: 011-81-6-944-6403
Fax: 011-81-6 944-6409
Japanese Department/Chain Stores: In the consumer sector, an important
feature of buying patterns has been low consumer mobility combined with high
population density. Surveys indicate that most Japanese consumer purchases
occur within a closely defined neighborhood, with the result that a large
number of Japan's retail outlets are neighborhood stores accounting for
roughly half of all retail sales. Most of these are served by three or more
wholesalers, resulting in "pyramid pricing." The emergence and growth of
self-service discount stores and "superstores" are helping to reduce the
amount of layering and price markups. In addition, department and specialty
stores are increasing their volume purchases from abroad. Department stores
in Japan typically carry 500,000 items and make 80-90 percent of purchases
from as many as 1,500 wholesalers, many of which supply goods on
consignment. Some stores are establishing central purchasing offices, and
many of the large superstore and department store chains now have direct
buying offices in the United States:
Daiei, Inc. Daimaru, Inc.
Suite 215 1114 Avenue of the Americas
1025 West 190th Street New York, NY 10036
Gardena, CA 90248 Phone: (212) 730-7138
Phone: (310) 515-0141 Fax: (212) 840-7645
Fax: (310) 515-1086
Daimaru California, Inc. Hankyu, Inc.
19401 South Vermont Ave., A-204 2951 28th St., Suite 3010
Torrance, CA 90502 Santa Monica, CA 90405
Phone: (310) 516-9716 Phone: (310) 396-8710
Fax: (310) 516-9578 Fax: (310) 396-3026
Isetan Co., Ltd. Matsuzakaya America, Inc.
666 5th Avenue, 12th Floor 460 East 3rd Street
New York, NY 10103 Los Angeles, CA 90013
Phone: (212) 767-0300 Phone: (213) 626-0133
Fax: (212) 767-0307 Fax: (213) 626-7936
Mitsukoshi, Inc. Seibu Corp. of America
465 Park Avenue 55 East 59th Street
New York, NY 10019 New York, NY 10022
Phone: (212) 753-5580 Phone: (212) 826-1144
Fax: (212) 355-7161 Fax: (212) 826-1148
Taka-Q Co., Ltd. Takashimaya, Inc.
115 West 57th St., 3rd Floor 1290 Ave. of the Americas
New York, NY 10019 Room 1731
Phone: (212) 489-4720 New York, NY 10104
Fax: (212) 664-0138 Phone: (212) 265-2577
Fax: (212) 265-1539
Tokyu Department Store Co., Ltd.
24712 Madison Street
Torrance, CA 90505
Phone: (310) 530-8207
Fax: (310) 530-4173
The retail market is in the process of change. Significant alterations in
Japan's Large Scale Retail Store Law have eased restrictions on opening new
stores. There has been a substantial increase in the number of applications
to open new retail stores since the reforms have been announced. Import
clearance procedures at airports and seaports have been simplified, and
plans are in place to improve and expand facilities in these areas.
Faced with deregulation and changing patterns of consumption, many Japanese
companies are modifying marketing and sales strategies to take advantage of
these developments. Imports are already benefiting from these trends as
seen in increased sales by Japanese department stores and other mass
merchandisers and by a variety of new retailing ventures that match changing
Japanese lifestyles. There are also indications that some distributors are
modernizing and consolidating operations.
Other U.S. Governmental Assistance: See section titled "Where to Get Market
Information and Trade Leads."
The Japanese Government: See section titled "The Japanese Government."
Choosing a Business Partner in Japan
Selecting the appropriate partner in Japan is probably the single most
critical factor for your success in the market. Your partner should be
someone with whom you can communicate comfortably -- someone who can teach
you the subtleties and finer points of the product market in Japan. Your
partner should be able to answer most of your questions regarding the sale
of your goods. He should be able to recommend alterations on your product
which are required by government regulation or which will make your product
more attractive to the Japanese consumer. You need to maintain a constant
dialogue with your Japanese partner for an effective relationship. You need
to be a good listener. You should also anticipate and respond to the needs
of your potential customers. If you are not successful in establishing a
good working relationship and trust with your Japanese partner, you will not
succeed in Japan.
Occasionally, an American exporter wishes to change
agents/distributors/representatives. The reasons for this decision may
vary. If the U.S. product does not sell well within the first
year, the American exporter often incorrectly assumes that their Japanese
partner has not done his or her job. However, there are other factors which
must be considered such as lack of patience on the American firm's part,
poor product quality or after-sales service, or an unwillingness to meet
Japanese consumer tastes. If you have established a good working
relationship and trust with your partner, you should be able to determine
what the real factors are. Remember it is difficult to change partners in
Japan. Business in Japan is driven by personal relationships. Terminating
the relationship between you and your Japanese trading partner may alienate
you from the business community. Furthermore, it is very difficult to keep
a search for another partner secret from the original partner. The impact
on the existing relationship and overall business in Japan could be fatal.
The following is a 12-point checklist for your company in choosing a trading
partner in Japan:
(1) Does your prospective partner have knowledge and expertise in your
product area, and an established network in the specific area that you
want to sell to?
(2) Can you use the distribution network that your partner owns?
(3) What is the quality of your partner's employees, and what team will be
working for you?
(4) What is the size of the sales force, and what percentage of their time
will your product receive?
(5) What is your partner's corporate culture? Are you his/her first
experience with an international company?
(6) What geographic coverage can your partner provide? Can he/she help you
deliver the product outside of the major cities?
(7) How does your partner handle strategic planning? Has he/she performed
a thorough analysis of what it will cost to handle your product?
(8) How is your partner positioned in the marketplace and what are his/her
long-term goals? Are these compatible with yours?
(9) What is your partner's attitude toward advertising and investment? Is
he/she a savvy marketer?
(10) Is there a conflict of interest between your product and your partner's
product?
(11) Do you have support from the senior management of the Japanese company
and are they accessible to you?
(12) Does the contract provide adequate intellectual property protection for
your firm?
Which is the Best Entry Mechanism for Your Company?
Selecting your best entry method requires an assessment of the potential
market size, the structure of the market, the complexity of existing
distribution channels, your firm's resources, and your willingness and
ability to commit to the Japanese market.
In evaluating the alternatives for market entry, you should carefully weigh
the alternative costs of various distribution options against the potential
market for your products. The type of product that you are interested in
exporting to Japan may make your decision easy. You should choose a
business partner who will profit from marketing your product or service and
who is experienced in importing your product line.
More Advanced Market Entry Alternatives
Beyond the agent/distributor relationship, if your firm is interested in
establishing a permanent presence in the Japanese market, other options
include setting up a representative or branch office, subsidiary, or joint
venture. In choosing an entry option, your company should consider many
points, including the volume and type of business to be carried out, costs,
and the degree of control you wish to maintain. Not every entry alternative
will suit your company.
You can also enter the market by appointing a Japanese manufacturer of a
complementary product line as your representative. This type of
representation allows you to take advantage of product compatibility with
the Japanese firm's own lines and to utilize its distribution and service
network. Such arrangements have frequently led to mutually beneficial
relationships, including licensing agreements and joint ventures for partial
or full manufacturing of products in Japan. Some foreign firms use a
freight forwarder to handle some of the details of importing, such as
arranging for transportation and customs clearance. Necessary technical
services can be arranged through contracts with specialized technical or
engineering firms which possess the required capabilities.
Establishing an Office in Japan
If your company can afford to do so and is serious about doing well in the
Japanese market, you should strongly consider the establishment of a
representative or branch office in Japan. This sort of presence will allow
your firm the most direct control of its operations in Japan and will help
ensure the quality of after-sales services. This office can gather
information on the competition, emerging new technologies, and developing
market trends.
Representative Office: A foreign company that wishes to collect information
or to facilitate contacts in Japan should consider establishment of a
liaison or representative office. This liaison office may be established to
develop market data, provide information to potential clients, and refer
customers to distributors or trading companies that can accept orders. The
office can also work with distributors to develop the necessary promotional
and service mechanism. It is not necessary to obtain special approval from
the Japanese Government to establish a liaison office, but it must have no
income and is therefore not allowed to handle orders directly. Moreover,
this option is free from Japanese tax burdens. The liaison office may
function by providing guidance and support to an agent, and managing all
marketing activities except for the formal sale.
Branch Office: To go a step beyond a representative or liaison office, you
can establish a sales or branch office. A branch office can engage in
trading, manufacturing, retailing, services, or other business. Until
recently, to set up a branch office, a company had
to file a notification with the Ministry of Finance through the Bank of
Japan between 3 months and 30 days before the office was established and
register with the Ministry of Justice within 3 weeks of the opening of the
office. However, as part of SII, this prior notification requirement has
been replaced by ex post facto notification for investment in unrestricted
sectors. A special license still must be obtained from the appropriate
Japanese ministry to engage in business in certain sectors. These include
broadcasting; telecommunications; electric power generation; domestic, rail
and air transportation; arms; gun powder; atomic energy; aircraft; space
development; narcotic manufacturing; vaccine manufacturing; security guard
services; agriculture, forestry, and fisheries; petroleum refining and
marketing; leather and leather product manufacturing; shipbuilding; banking;
and mining. A sales office may take and fill orders, and is liable for
payment of Japanese taxes. A sales office may carry out a full marketing
program, including arranging for advertising, recruiting a sales force, and
carrying out all necessary promotional activities.
Other alternatives include incorporating your own subsidiary company in
Japan, joining with a Japanese company in a joint venture arrangement, or
acquiring stock in a Japanese corporation. These options are likely to be
much more complicated and involve more time and expense, but they can offer
an effective means for a company to manufacture locally, guarantee better
protection for proprietary information, and penetrate some markets which
have subtle but substantial barriers to imports.
A major problem for smaller U.S. firms entering the Japanese market is the
high cost of establishing a permanent presence which allows for the
follow-up capability necessary to achieve full market potential. You may
wish to consider arranging for representation through the use of the
previously mentioned Agent/Distributor Service, your contacts established at
a trade show or mission, your state's representative office in Japan, or
your industry's trade association. Another approach is to pool resources of
several firms which have complementary product lines and a desire to operate
in Japan. Such a group might establish a marketing association, consortium,
or jointly owned export management company, and set up a sales and service
office in Japan. This operation may take the form of a liaison office which
handles contacts with agents, distributors, and customers. Considering the
importance of brand image in Japan, group members may wish to consider
adopting a group logo which would be a universally recognized and accepted
identity for their product line. This approach is not widely used by U.S.
firms in Japan, but has been successfully employed by a number a European
groups. Another alternative is to piggyback your product with a
complementary product line of a firm which is successfully exporting to
Japan.
In evaluating the alternatives for market entry, you should measure the
projected sales and potential market share for your products against costs
of various distribution options. In Japan, the justification for working
with an intermediary is lower cost while sacrificing direct market feedback
and long-run profit potential.
For additional information on establishing an office in Japan, refer to the
following publications:
Setting Up a Business in Japan: A Manual (1991), Japan External Trade
Organization (JETRO), New York Office -- (212) 997-0400.
Guide to Investment in Japan (1991), Industrial Bank of Japan (IBJ),
Washington, D.C. Office -- (202) 835-0455.
Guide to Direct Investment in Japan (1991), Japan Development Bank (JDB),
Washington, D.C. Office -- (202) 331-8696.
Establishment of a Representative Office in Japan (1990), Japan External
Trade Organization (JETRO), New York Office -- (212) 997-0400.
Direct Foreign Investment in Japan (1987), American Chamber of Commerce in
Japan (ACCJ).
Setting Up & Operating a Business in Japan: A Handbook for the Foreign
Businessman (1988), by Helene Thian, published by the Charles E. Tuttle
Company.
Establishing a Business in Japan (1986), U.S. & Foreign Commercial Service,
U.S. Embassy Tokyo, Unit 45004, Box 271, APO AP 96337-0001.
Licensing
Licensing product technology is an alternative with considerable appeal. A
firm can immediately contribute to its bottom line with little investment or
direct cost. What is often overlooked, however, is the missed opportunities
and indirect costs of licensing.
Licensing is a very limited form of market participation. High potential
returns from marketing and manufacturing efficiencies are lost, and very
little market information is gained. Often licensing agreements prove to be
short-lived as the licensee develops the ability to become a competitor to
the licensor in all markets. Indirect costs of managing and policing the
licensing agreement are also often overlooked. There are many cases of
licensees under-reporting sales and under-remitting royalty payments.
The key to success in a licensing agreement is having a partner whose goals
coincide with your own. Indirect expenses should be anticipated, and the
contract should provide for a cross-technology exchange between licensor and
licensee. Important to the management of a licensing agreement is having a
well-qualified individual assume responsibility over the management of the
contract. This individual should maintain close contact with the licensee
and stay abreast of the Japanese market by visiting Japan periodically. A
carefully constructed and executed licensing agreement can prove beneficial,
but the risks and costs should be anticipated.
Until recently, according to the Foreign Exchange and Foreign Trade Control
Law, nonresidents who planned to execute or amend any agreement with
Japanese nationals for the import of technology had to give prior notice to
the Ministry of Finance through the Bank of Japan and any other ministry
exercising jurisdiction over the affected industry. In practice, the
investor was notified that the Japanese Government had no objection within
one hour following notification, if the proposed investment was in
unrestricted industries. However, as part of an SII commitment, this prior
notification requirement has been replaced by ex post facto notification for
investment in unrestricted sectors. Technology transfer agreements may
normally be executed except in those cases involving the transfer of
specially regulated and/or designated technologies, in which case a report
must be filed with the Ministry of Finance and the appropriate Japanese
ministries.
Special regulations apply to the following sectors based on the U.S.-Japan
Treaty of Friendship, Commerce, and Navigation and the Code of
Liberalization of Capital Movements of the Organization for Economic
Cooperation and Development (OECD): broadcasting; telecommunications;
electric power generation; domestic rail and air transportation; arms; gun
powder; atomic energy; aircraft; space development; narcotic manufacturing;
vaccine manufacturing; security guard services; agriculture, forestry, and
fisheries; petroleum refining and marketing; leather and leather product
manufacturing; and mining.
Moreover, the Japanese Government has specified the following 12 areas as
the designated technologies which have significant influence on the security
of the nation and the interest of the national economy: aircraft, arms, gun
powder, atomic energy, space development, electronic computers, electronic
parts for electronic computers for next generation, appliances for laser
processing and light communication, innovative materials, salt electrolysis
by nonmercurial methods, petroleum production at sea bottom, and leather and
leather products.
In addition to the regulations mentioned above, international technology
assistance contracts are subject to screening by the Japanese Fair Trade
Commission (JFTC). The licensor and licensee are required to file jointly
the report of the licensing agreement with the JFTC within 30 days after the
conclusion of the contract. The JFTC is authorized to act if the contract
may be interpreted to constitute unreasonable restraint of trade or unfair
business practices. The U.S. Government has sought the removal of this
discriminatory filing requirement in the SII.
Franchising
The franchising industry has become a multibillion dollar business in
Japan. Originally developed in the fast food area, it has expanded into a
variety of new sectors. In 1989, there were 626 domestic and foreign
franchising chains in Japan with aggregate total sales of 7 trillion yen
($49 billion) at 131,267 outlets (franchised -- 115,750; directly operated
-- 15,517). The number of franchising chains, 626, is about one-third of
the franchise chains in the United States.
In general, the details of a master franchise agreement are not disclosed.
However, certain similarities among franchise agreements exist. Most U.S.
franchisors usually do not try to recruit actual shop operators in Japan
directly from the United States. Instead, U.S. firms concentrate their
efforts on finding a master franchisee, which is usually either a Japanese
company or a joint venture between the U.S. franchisor and a Japanese
company, or in some cases, a wholly owned subsidiary of the U.S. company.
The master franchise holder is then responsible for the actual recruitment
of Japanese franchisees. Usually, the master franchisee will pay the U.S.
company a lump-sum payment which is payable over a certain period of time,
in addition to royalty payments which average around 5 percent of the
sales. Since the quality and nature of services are quickly changing to
suit market demand in Japan, the life cycle of a new type of service
organization or fast food chain tends to be relatively short. Typically in
Japan, once consumer interest or need is successfully identified several
companies with similar capabilities rush into the market and generate fierce
competition. Therefore, U.S. franchising operators should consider entering
the Japanese market only after preparing a feasibility study, developing a
long-term investment plan, and carefully evaluating the timing and life
cycle of the particular good or service.
Direct Marketing
A relatively recent development has been the significant growth of direct
marketing in Japan. According to Japan Direct Marketing Association (JADMA)
estimates, total sales revenue of its members in JFY 1988 (Japan Fiscal Year
-- April 1, 1988 - March 31, 1989) was $8.8 billion, an increase of nearly
31 percent over the previous year.
U.S. direct marketers enjoy the benefit of a well-educated Japanese populace
with a high level of discretionary income and a great curiosity about the
United States. Interesting, unique, well-made, brand-name items, adapted to
Japanese tastes or sizes, sell well in Japan. The following are two
marketing methods which illustrate how U.S. products are being successfully
sold through direct marketing in Japan:
One marketing approach is to use a non-duty-free-catalog aimed at
travelers. Japanese going overseas on holiday desire to minimize the time
spent shopping for "obligatory" gifts and souvenirs for friends, relatives,
and co-workers. Japanese consumers will often know before going overseas
the gifts that they want to buy. Many travel magazines describe in detail
the "best shops" in the major U.S. cities that Japanese should visit.
Airline companies and travel agents have been aggressively promoting catalog
sales of non-duty-free imported goods, especially cosmetics, accessories,
gifts, and food (excluding most brand-name luxury goods, which have an
exclusive agent in Japan). Travelers place the orders before departing and
the goods are delivered to their home after they return. These goods are
imported just like other imports (customs-cleared, customs duty paid, and
consumption tax paid), so the price is higher than if purchased by the
traveler overseas, although usually lower than the retail price at
department stores in Japan. The primary value of this service is
convenience. There is great opportunity for firms with an innovative
approach for reaching and servicing this market.
Another marketing method is to utilize the foreign catalog sales corner at
50 major Japanese post offices. This approach, employing the so-called
International Mail Order Support Service (IMOSS), allows customers to select
merchandise from a foreign company's catalog, pay for the merchandise by
international mail order or credit card, and receive shipment directly from
the seller located overseas. There is no need for the direct marketer in
this case to stock inventory in Japan.
One negative market condition affecting direct marketing is that the
Japanese consumers desire to inspect a product prior to purchase.
Successful Japanese catalog companies maintain a showroom where the customer
can examine the product before ordering. Also, some of the largest catalog
sales operations are managed by well-established department stores and other
reliable retail chains.
Japanese consumers are demanding about the condition and packaging of
goods. Everything must arrive in perfect order, just as if they had
purchased the item in a store. It is very common that goods are returned
for claims of damage. Direct marketing should not be seen as a way to get
around the Japanese customer's expectation of strong after-sales product
support.
Without a well-established position, it is unrealistic for a U.S. company to
expect to rent a mailing list, send an English-language catalog directly
from the United States to Japanese individual customers, and be inundated
with orders placed by these customers. U.S. companies aiming to enter this
market should at least be prepared to make an investment in service
functions such as market research and product support. In addition, a
representative in Japan can act as a liaison with the U.S. supplier to
handle receipt of claims, customs clearance, public relations, and the
preparation of a Japanese-language catalog. Warehousing and delivery can be
managed by the representative as well.
The Japan Direct Marketing Association: In response to the recognized need
for assistance in the direct marketing field and with the guidance of the
Japanese Ministry of International Trade and Industry (MITI), the Japan
Direct Marketing Association (JADMA) was founded as Japan's first and only
officially recognized direct marketing association on October 11, 1983. The
aims of JADMA are: advancement of a standard of commercial ethics in the
direct marketing industry; promotion of fair business practices; consumer
protection and education; a systemized structure for settling consumer
complaints; modernization of the direct marketing industry; representation
of the trade's interests with appropriate government agencies; conducting
seminars and developing educational programs; collection and distribution of
information from both domestic and international sources; and greater
contact and cooperation with related trade associations overseas. In
addition, JADMA conducts research aimed at exploring the future potential
for utilizing new media forms by the direct marketing trade. JADMA's
address is:
The Japan Direct Marketing Association
No. 32 Mori Building, 3-4-30 Shibakoen
Minato-ku, Tokyo 105 JAPAN
Phone: 011-81-3-3434-4700
Fax: 011-81-3-3434-4518
Pricing
The acceptance of your product in the Japanese market is based primarily on
its quality and after-sales service, not its price. However, pricing
analysis is a critical aspect of marketing in Japan for your company.
Markups at the various levels of the Japanese distribution system have
caused some imported items to be priced at levels which are noncompetitive
with Japanese domestic products, even though the landed price of the
imported product was comparable. Prices of competitive Japanese products
can usually be taken as a starting point for tracing back through
distribution channels the appropriate margins for each link in the chain.
You should carefully examine the margins which are provided by both the
domestic and foreign competition and compare the cost of establishing your
own channels. Negotiations with a prospective agent should be conducted to
determine a realistic selling price which would include reasonable and
acceptable markups. Your company should also attempt to eliminate from its
export price all purely domestic costs involved in marketing the product in
the United States.
Advertising
Successful marketing in Japan of your product requires appropriate
advertising and market research. In many instances, you can rely on your
trading partner for assistance.
American exporters often find that advertising strategies that succeeded in
other countries will not work in Japan. Advertising which appeals to the
emotions and senses rather than logic is successful in Japan. As a
homogeneous and extremely literate country with a highly concentrated
population, Japan is well-suited for the use of mass media advertising.
With almost instantaneous communication emanating from Tokyo and several
regional communication centers, advertising through mass media plays an
important role in marketing in Japan.
Television, radio, and both mass circulation and specialized newspapers and
magazines are available for advertising. There are a large number of
general and specialized business publications available for reaching the
target audience for the marketing of such goods as industrial products.
Transit advertising in railway cars and buses is particularly common because
of the high degree of reliance on public transportation, and the long
commute encountered by many Japanese workers. Outdoor advertising is also
popular and use of direct mail promotions is growing at a rapid pace.
The Japan Fair Trade Commission regulates sales promotion with rules
regarding the value of premiums which can be offered in connection with
sales promotion, the type and content of product labels, and the claims
which manufacturers can make about their products in advertisements. Local
governments have strict rules governing the design, size, and usage of
outdoor advertising.
For a list of American and Japanese advertising and public relations firms
in Japan, mailing and mailing label services, or a selected list of business
publications in which your firm could advertise, contact the Japan Export
Information Center at (202) 377-2425.
The Japanese Consumer
Your company should carefully consider the characteristics and preferences
of the over 123 million consumers in Japan. Japanese consumers are the most
discriminating shoppers in the world. They have become increasingly
sophisticated in their tastes and demand high quality and good after-sales
service in the products they purchase. After-sales service in Japan is an
"attitude." It is not uncommon for a Japanese manufacturer to apologize for
a breakdown in a piece of machinery it serviced two years ago when the
customer returns to purchase another product. The Japanese also continue to
be rather brand-conscious, but a trend toward individuality has been
noticeable in recent years. The Japanese make greater demands in terms of
the appearance of a product. Packaging is a very important factor in
marketing. For example, the gift-giving market in Japan is very large.
However, great emphasis is placed upon the packaging with less importance
placed on the gift itself (typically in the $10-$15 price range). In
addition, for trade shows, the presentation of the product and the booth is
as important as the product itself. Remember, image is everything in Japan.
The standard of living in Japan is relatively high, although housing
standards and the amount of leisure time are lower than in other
industrialized countries. Medical care in Japan is good, a nationalized
health care system is in place, and the Japanese life expectancy is among
the highest in the world. The Japanese education system is topnotch and the
literacy rate is approximately 99 percent.
According to the Japan External Trade Organization (JETRO), Japanese
families tend to spend the largest part of their monthly income on food (27
percent), followed by hobbies and leisure (12 percent), housing (5 percent),
and clothing (5 percent). Monthly expenditures on leisure have been
increasing recently as the Japanese economy becomes more consumer-oriented.
Homes in Japan, particularly urban areas, are very small. This fact should
be taken into account by your company because the lack of storage area in
most homes limits the amount and size of Japanese purchases. Furniture and
appliances therefore must be scaled down in size in order to fit into most
Japanese homes. Likewise, since the Japanese tend to be smaller physically
than Westerners, clothing and shoe sizes should be scaled down to fit the
local standards.
The consumer market in Japan is segmented according to factors such as age,
sex, income level, and lifestyle. While the mass media's nationwide
influence and standardized education have contributed to the homogeneity of
the Japanese population, regional differences exist in areas such as climate
and cuisine. Tastes vary tremendously depending on age and sex in Japan.
Like their American counterparts, Japanese young people tend to enjoy trendy
items. Japanese college students have more leisure time than junior or
senior high school students. The average male white-collar worker in Japan
spends a portion of his salary on dining, alcohol, lunch, golf, cigarettes,
hobbies and leisure. A noteworthy trend of equivalent wage earning females
is that they spend more money than their male counterparts. These women,
along with single males and students, are leaders in consumer spending in
Japanese society due to their high incomes and large discretionary spending
habits. After men join the work force, they become more conservative and
usually have less money for discretionary spending. Until marriage, young
working women usually live at home. Once married, they tend to leave their
jobs in order to manage their households, including the family budget.
Another significant change in the consumer market is the graying of Japanese
society as more and more Japanese are nearing retirement. Retired persons
tend to have more leisure time and more discretionary income.
How to Please the Japanese Consumer
The following tips should help you satisfy the needs of your potential
customers:
Give a High Level of Support to Customers: In virtually every product or
service sector, markets in Japan are competitive to a degree unknown in most
other countries. Consequently, Japanese buyers, agents, and distributors at
all levels of the distribution chain are accustomed to receiving a higher
level of support than many foreign suppliers normally provide. Suppliers
commonly provide comprehensive personnel services, including actual staffing
of retail points of sale and training of the buyers' personnel. Suppliers
also work with buyers to help develop uses and applications for products.
Know Every Detail: Because large numbers of companies are struggling to
increase market share in all sectors, they have become adept at identifying
small niches in their sector and being the first or best at creating
products meeting specialized demands in those niches. Successful
differentiation of your product is necessary to set your product apart from
the competition.
Design for the Market: The fragmentation of sectors into a multitude of
small, specialized niches and the willingness of Japanese companies to
create products to fit those niches means suppliers must work closely with
all levels of the distribution chain to provide products specifically
designed for their target market. In the United States, a market is often
created for a product; in Japan, the product must be tailored for a specific
market.
Expect Small Orders at First: Small initial orders are a natural outgrowth
of competition, differentiation, and the Japanese willingness to design for
the market. The companies and people involved with a new product must
assure themselves that the item will meet the specific needs of the customer
by testing the market.
Emphasize Quality: Attention to quality standards is perhaps the most
important aspect of the Japanese market. The Japanese are accustomed to
high quality and they insist on it. The concept of quality applies not only
to the product, but to its presentation as well. For instance, in
day-to-day life, how food is presented and the way gifts are wrapped are
just as important as the items themselves. Your firm must do its homework
and be sure that items translated into Japanese are properly prepared and
free of grammatical and typographical errors.
Recognize Japanese Sense of Structure: Japanese are proud of their strong
sense of unity, organization, and structure. In group meetings, your firm
should make clear through its actions who is the "point person" or senior
spokesperson for the group. This action often can be accomplished through
the use of business cards. Exchange of business cards is a necessary
formality in business meetings, and it is advisable to have them translated
into Japanese on the reverse side. Also, it is often a good idea in initial
meetings to outline your company's structure and history.
Demonstrate Reliability: To succeed in Japan, it is very important to keep
promises made and to respond promptly to communications from Japanese
business and trading partners, especially when problems or emergencies
arise. Reliability extends to permanence in the marketplace. The Japanese
need to know that you will be in the market for the long term.
BUSINESS CUSTOMS AND PRACTICES
An understanding of and sensitivity to Japanese business and social
practices is of great importance in establishing and maintaining strong and
successful business relationships in Japan. Many Americans may assume that
because meetings and correspondence are carried out in English, Western
rules apply. While Japanese business executives do not expect foreigners to
be fully knowledgeable about all business and social customs, you will find
that accommodation to such customs and practices is well worth the effort.
Remember, you are not just trying to sell your product, but also the image
of your company and, to a large degree, yourself. Showing understanding and
sensitivity will only help in your efforts to succeed in Japan and will
demonstrate to your potential customers your seriousness about the market.
Japanese business executives place considerable emphasis on face-to-face
contact. A personal call on a potential business partner based on an
introduction will be more effective than initiating contact by a letter or a
fax. The "cold approach" is definitely not the best approach in Japan.
Time and time again, American firms that make such overtures find that the
Japanese companies they have contacted do not reply. Rather, an
introduction by an intermediary who holds significant status is of
tremendous assistance in establishing business contacts and cannot be
overemphasized.
Initial contacts between Japanese firms are usually formal and made at the
executive level, while more detailed negotiations are often carried out at
the working level. The main purpose of a first meeting is to get
acquainted, establish the broad interest of the calling party, and allow
both sides an opportunity to access each other to determine whether or not
more substantive discussions are desirable. Do not expect to have a
contract signed by the time you leave the first meeting. Remember, the
objective of your first few meetings is to establish rapport and trust
between the two parties. A futile attempt to pressure your potential
partner into a contract will only alienate.
Business cards (meishi) are exchanged extensively in Japan and serve as a
useful reference and record of contacts. The exchange of business cards,
usually at the start of a meeting, helps to formalize the introduction
process and establishes the status of the parties relative to each other and
their place of business. You should attempt to familiarize yourself with
the etiquette of exchanging cards, as well as other Japanese social
practices. The traditional Japanese greeting is the bow, although most
Japanese dealing with foreign business executives will expect to shake
hands. A nod of the head or slight bow by a foreigner in acknowledgement of
a Japanese bow is appreciated. Japanese business executives do not normally
deal on a first name basis in business relationships, and initial business
and social contacts are characterized by politeness and formality.
One source of confusion in business communication may come from the Japanese
language itself. The word "hai" means yes in Japanese but its usage varies.
"Hai" is often used to mean "yes, I understand what you said" rather than
"yes, I agree." It is usually safer to assume that a Japanese person is not
making a decision but instead is acknowledging and understanding what has
been said. Also, the Japanese language is less precise than English and
allows the Japanese to be deliberately vague. The concept of saving or
losing face is an important one, and the Japanese are able to avoid
confrontation, embarrassing situations, and direct rejection by their use of
indirect language.
The Japanese rely heavily on nonverbal communication. They tend to look to
nuances, inferences, and signals to convey intent. Thus, while American
negotiators are inclined to focus on tactics and press for agreement as a
negotiating objective, the Japanese side prefers to probe, feel out the
other party, and be relatively certain of the other side's position before
putting forward a proposal on which both sides can agree.
Interpreters are widely used in business meetings between Japanese and
foreign firms. While many Japanese business executives speak some English,
the use of a good interpreter can avoid miscommunication. The effective use
of an interpreter requires preparation, including the thorough briefing of
the interpreter in advance on the background of the meeting, and on any
technical aspects which may be covered in particular. Using an interpreter
efficiently can make or break a potential business deal. Always bring your
own interpreter, even if the Japanese side is supplying one and even if the
Japanese side speaks English as well. Try to always use the same
interpreter. Have the interpreter debrief you after the meeting on his/her
impression of nonverbal signals and the mood of the meeting, and
conversation among members of the Japanese side. After a meeting (or trade
show, if applicable), go through the business cards and other information
that you have collected. Have the interpreter translate the cards not
already translated and clarify those that are, especially titles. Get the
interpreter's impression on who is in charge, whether the people you have
met have the ability to make decisions, and what the next move of the
Japanese side may be. Speak slowly and clearly, avoid idioms or slang that
may be difficult to translate, and look at your Japanese counterparts, not
the interpreter, when speaking.
The group decision-making process which is universal in Japan may make it
impossible to receive a prompt response. The Japanese negotiator represents
a group, and until internal agreement has been reached on issues under
discussion, no commitment can be made. For this reason, you should not
expect an immediate answer, but should recognize that negotiations normally
extend over a long period of time. It takes a longer time to cultivate
business relationships in Japan than in the United States. American
business executives coming to Japan expecting to settle their business in
just a few days often depart in frustration, having made no progress.
The Japanese approach business negotiations in a tentative manner,
developing a relationship in stages: first, a limited arrangement; then, if
the relationship is mutually satisfactory, it may be expanded into a
broader, more binding agreement. Since Japanese are accustomed to
international business dealings, the foreign preference for more formal and
structured contractual obligations is recognized. Therefore, contracts have
become a universally accepted practice in foreign trade. However, Japanese
business executives emphasize good faith over legal safeguards in business
relationships and have little confidence in detailed contracts which attempt
to cover all possible contingencies.
The Japanese preference is for broad agreements and mutual understanding, so
that when problems arise they can be handled flexibly on a case-by-case
basis. Thus, discussions with Japanese entities should be comprehensive.
Before entering into a contractual agreement, both sides should thoroughly
and openly discuss the arrangement and their expectations to avoid
misunderstandings later. Japanese prefer the security of long-term,
reliable, and exclusive business arrangements. Once a commitment is made,
it is for the long term, and it becomes quite difficult to break an
agreement and find a new Japanese business partner.
Although all forms of payment are in general use in international
transactions, an irrevocable letter of credit payable on sight is the most
common form of settlement. Deferred payments in transactions with U.S.
firms are comparatively rare. With Japan, trade settlements are customarily
done on the basis of promissory notes, typically 60 to 120 days, and banks
will provide short-term financing through discounting and rollover of notes.
In the instance of a commercial dispute settlement, the Japanese legal
system tends to be slower and more cumbersome than its U.S. counterpart. In
general, Japanese companies are more apt to seek out-of-court dispute
settlements and avoid judicial proceedings.
The following are typical Japanese negotiating tactics:
(1) The Japanese usually respond to the other party's proposal -- rather
than taking the initiative.
(2) The Japanese tend to single out specific elements and negotiate one
element at a time -- rather than packaging a deal.
(3) The Japanese tend to maintain a relatively quiet response mode at
meetings after stating their official position. They usually allow the
other party enough maneuverability in order for the other party to keep
giving bit by bit.
(4) Once a concession is made, it becomes the new baseline (without a
counter-concession on their part) and they move on to the next item.
Their strategy usually is to keep whittling away one concession at a
time.
(5) The Japanese use time and patience to wear down their opponent --
consciously planning on long, drawn out periods of successive meetings.
(6) The Japanese negotiating team never has the authority to commit in a
"give and take" type approach. They are usually only authorized to
receive offers and communicate prior authorized consensus positions.
(7) The Japanese tend to use the "bad guy" ploy extensively, that is,
constantly referring to other organizations such as government
agencies/authorities concerning requirements or required concessions.
How to respond:
(1) Do not expect rapid progress.
(2) Learn to be quiet and accept long pauses in discussions. Out wait the
Japanese until they respond constructively to your last proposal.
(3) Do not make successive individual concessions -- insist on a package
deal.
(4) Do not make a follow-on proposal with further concessions until the
Japanese respond to the current proposal with concessions on their
part. Set an agenda for the next meeting accordingly.
(5) Do not fall for the "cultural differences" ploy. Be polite but direct.
You can expect the Japanese to understand Western business practices and
culture. They should be prepared to compromise and accommodate on those
issues which you identify as vital and absolutely essential. However,
you should likewise show an appreciation of Japanese culture. This will
help facilitate negotiations.
(6) Keep records on concessions by both parties.
(7) Have a fluent Japanese speaker present at negotiations to preclude
private discussions during meetings and to insure the translations are
accurate.
(8) Negotiate from a position of strength and confidence. The Japanese do
not respond positively to real or perceived weakness, nor do they
respond to idle threats and intimidation.
BEST U.S. EXPORT PROSPECTS
Many areas in the Japanese market have substantial opportunities for U.S.
exporters to Japan. Today, exporting American goods and services, as well as
investment in Japan, is a wise course for many businesses planning
expansion. The competition is intense, but when an American firm correctly
identifies a competitive window in a Japanese product sector and has the
capability to effectively export a quality product to Japan, it will likely
find an opportunity for successful sales. A great effort must be made to
gain initial market share. However, a firm with long-range goals is
well-positioned to find eventual profitability.
The following ten product areas are considered to offer significant export
opportunities to American firms. They were chosen because they offer (1)
short-term growth potential or (2) a large market receptive to additional
U.S. suppliers. The list highlights product areas where Japanese demand is
strong, and American suppliers are competitive and have the greatest
likelihood of expanding exports to Japan. For many of these sectors, a
brief Industry Subsector Analysis (ISA), which provides more information, is
available. For a list of ISAs, contact the Japan Export Information Center
(JEIC) at (202) 377-2425.
Note, however, that the term "promising export areas" does not necessarily
mean that U.S. companies in these sectors can successfully enter the market
or that they are better-positioned to satisfy market demand and to take a
market share over other competitors. Rather, it more specifically means
that various commercial environmental factors indicate that there is
increasing demand in such sectors and that after having identified the
opportunities for growth, domestic companies are aggressively entering the
market, as well as other Asian and European firms. Therefore, competition in
promising export product areas is very intense, with domestic companies
especially inclined to rush into these market sectors irrespective of the
effect on short-term profitability.
The name of each product sector is followed in parentheses by: (1)
estimated market size in 1991, (2) estimated market growth rate from 1991 to
1993, (3) estimated U.S. imports in 1991, and (4) estimated average growth
rate of U.S. imports in 1991.
Pharmaceuticals
($50 billion, 3 percent, $900 million, 5 percent)
Japanese physicians and other medical specialists look to the United States
for the most advanced products. However, in the over-the-counter market,
U.S. brands are not very well known. Japanese drug manufacturers have
stepped up their R&D activities, and European suppliers are consolidating
their distribution networks. Importation and sales, as well as local
production, of pharmaceuticals is one of the most tightly regulated areas.
There are two interrelated Japanese governmental approvals necessary: a
"shonin" for a product based on its efficacy and safety and a "kyoka" for
the business of manufacturing or importing, which requires a minimum level
of personnel and facilities. Pharmaceuticals account for approximately 30
percent of Japan's total medical expenditures. Products for an aging
society, including diagnostic and therapeutic drugs for elderly diseases,
have high growth potential. The most promising subsectors are in-vitro
diagnostic test reagents and home tests, with an estimated market size of
approximately $2 billion and $35 million, respectively.
Telecommunication Services
($60 billion, 8 percent, $2.7 billion, 10 percent)
The Japanese Telecommunications Law (TBL) was liberalized to allow
competition with the traditional common carriers, Nippon Telegraph and
Telephone (NTT) and Kokusai Denshin Denwa (KDD). As a result, there are
some 40 Type I (common) carriers competing with them. The TBL also allows
one-third foreign equity participation in the common carrier business. In
particular, Regional Bell Operating Companies (RBOC) should have an
excellent opportunity to participate in Type I business. The market for
land mobile communications services will grow rapidly in the future, which
should present further opportunities in the next generation of services for
cordless telephones. A most promising subsector is cordless telephone
licensing/Japan-wide services with an estimated market size of approximately
$800 million.
Marine Fishery Products
($30 billion, 1.5 percent, $2.5 billion, 12 percent)
Demand in this sector remains basically strong. The total Japanese domestic
catch in 1990 decreased from 1989 by 9 percent to approximately 11 million
metric tons. Notable decreases are seen in sardines, 12 percent to 3.6
million tons; Pacific mackerel, 47 percent to 248,000 tons; Alaskan pollock,
23 percent to 883,000 tons; squid, 28 percent to 532,000 tons; bonito, 12
percent to 299,000 tons; and tuna, 7 percent to 278,000 tons. Total imports
in 1990 improved by 6 percent to about $11 billion from 1989. Imported
seafood comprised approximately 30 percent of total seafood consumption.
Notable increases were seen in fresh and live seafood such as shrimp,
salmon, and tuna. Processed seafoods, such as eel and pollock roe, also
increased. The top seafoods imported from the United States include frozen
Pacific salmon ($650 million), frozen snow crab ($260 million), frozen
surimi ($240 million), frozen sablefish ($110 million), frozen king crab
($100 million), frozen salmon roe ($93 million), frozen cod/pollock roe ($90
million), frozen herring ($75 million), frozen cod ($70 million), and live
or fresh sea urchin ($67 million). The most promising subsectors include
fresh and frozen salmon (an estimated market size of approximately $2
billion), frozen crab ($850 million), and frozen mackerel ($100 million).
Biotechnology Products
($700 million, 15 percent, $10 million, 10 percent)
Japanese look to the United States for innovative technologies and products
in this field. Historically, Japan has had good fermentation technology.
Large nontraditional biotechnology companies which have abundant financial
resources are also making inroads. It is widely believed in Japan that
biotechnology could trigger a second technological revolution, following in
the wake of the electronic revolution. According to the Bioindustry
Association, the market by the year 2000 will be approximately 15 trillion
yen (roughly $107 billion at 140 yen/US$). Both the Japanese Government and
private sector are accelerating their R&D in biotechnology. The most
promising subsectors include pharmaceuticals and chemicals, with market
sizes of approximately $460 million and $100 million, respectively.
Medical Equipment and Supplies
($10 billion, 5 percent, $1.5 billion, 10 percent)
Japanese medical professionals generally look to the United States for
innovative and advanced products, but some criticize the lack of good
after-sales service from U.S. suppliers. Competition from local
manufacturers, followed by German and Swedish suppliers, is strong.
Japanese technology is said to be superior to other countries in areas such
as ultrasonic equipment and fiberscopes. The United States dominates
markets for implantable devices including pacemakers, artificial heart
valves, and artificial joints. Importation and sales, as well as local
production of medical equipment, are tightly regulated. There are two
interrelated Japanese governmental approvals necessary: a "shonin" for a
product based on its efficacy and safety and a "kyoka" for the business of
manufacturing and importing, which requires a minimum level of personnel and
facilities. The Japanese market for products in this sector is steadily
expanding. Products for the elderly and, in particular, cost-effective
diagnostic and therapeutic products have high growth potential. The most
promising subsectors include diagnostic imaging equipment and implantable
devices.
Industrial Chemicals
($160 billion, 3.5 percent, $6.5 billion, 10 percent)
Imports from the United States constitute approximately one-third of
Japanese chemical imports. Many Japanese trading companies are aggressively
seeking opportunities to develop new businesses with U.S. chemical
companies, even for very small market niches. Innovation is the key factor
which they want to see in these types of products. Even large trading
companies, which need at least $15 million in annual sales to sustain one
employee, look for new business with as little as $300,000 in annual sales
potential. For small to medium-sized Japanese trading companies, the
prospective sales figure can be as low as $150,000. Small to medium-sized
U.S. chemical companies with unique technology should have good
opportunities. The most promising subsector is specialty chemicals, with a
market size of approximately $100 million.
Aircraft and Parts
($8.9 billion, 8 percent, $4 billion, 10 percent)
The number of U.S. manufacturing firms in the aircraft sector is limited and
virtually all have offices in Japan. These companies are constantly
evaluating the balance between competition and cooperation with Japanese
manufacturers involved in aerospace. The number of cooperative efforts
among American, European, and Japanese firms has increased markedly in
recent years. While the United States still maintains a commanding lead in
aircraft and components, demonstrated by the U.S. bilateral trade surplus,
Japanese aircraft exports have been expanding in recent years. Another
important competitive factor is the entry of European manufacturers into the
Japanese market. Their aggressive marketing efforts pose a possible threat
to the long-standing dominance of U.S. products in the Japanese market. The
most promising subsectors are military and civil aviation aircraft with
market sizes of approximately $2.9 billion and $3.4 billion, respectively.
Architectural/Engineering/Construction Services
($620 billion, 5-12 percent, N/A, N/A)
On May 25, 1988, the U.S.-Japan Major Projects Arrangement (MPA of 1988)
became effective. The MPA designated 17 major projects as special-measure
projects offering opportunities for U.S. firms in architectural design,
engineering consulting, construction, and goods procurement. The estimated
value of these projects is $17 billion. In June 1991, the U.S. and Japanese
Governments completed a two-year review of the MPA and reached an agreement
to renew and revise the MPA of 1988. The new arrangement expanded coverage
to 17 additional projects, as well as 6 pending projects. These 23
additional projects are worth an estimated $26.7 billion. The most
promising subsectors, along with an estimate of their market size in
millions of U.S. dollars, are architectural services for private projects
($7,800), resorts in western Japan ($28,000), Sports Island ($850), Kyoto
Station Building ($700), and Synchrotron Projects ($300).
Sporting Goods
($14.1 billion, 4 percent, $365 million, 5 percent)
The import market for sporting goods has grown by 6 percent per year for the
last several years, and this upward trend is expected to continue until the
end of this century. Several factors are driving this growth, including
resort development, an increase in leisure time, the development of new
lightweight materials, and international competition such as the Olympics
which are to be held in Nagano in the winter of 1998. As a result of an
increased interest in nature, outdoor activities have become very popular,
and the market for outdoor equipment should continue to grow. The most
promising subsectors, along with an estimated market size in millions of
U.S. dollars, include golf equipment ($2,700), outdoor equipment ($1,400),
pleasure boats ($600), and fitness equipment ($500).
Computer Software and Services
($19 billion, 25 percent, $280 million, 30 percent)
A shortage of computer software engineers forces computer end-users to use
packaged software more, and to seek systems software to increase
productivity of software development. To enter the Japanese market,
"Japanization" is a must, including localization,
and translation of computer software. The software to be introduced to the
Japanese market should have a good sales record in the U.S. market. The
most promising subsectors include personal computer software and baseline
software for mainframes, with an estimated market size of $1.2 billion and
$1.1 billion, respectively.
Other promising export areas include the following sectors:
(1) Building Products
($6.7 billion, 3 percent, $1.1 billion, 2 percent)
(2) Laboratory Scientific Equipment
($4.1 billion, 7 percent, $720 million, 9 percent)
(3) Computers and Peripherals
($38 billion, 10 percent, $2.7 billion, 10 percent)
(4) Plastic Materials and Resins
($49 billion, 5 percent, $900 million, 17 percent)
(5) Automotive Parts
($92 billion, 5-10 percent, $680 million, 15 percent)
(6) Films and Videos
($1.5 billion, 3 percent, $425 million, 10 percent)
(7) Jewelry
($18.2 billion, 3 percent, $340 million, 4 percent)
(8) Telecommunications Equipment
($15.8 billion, 5 percent, $750 million, 35 percent)
(9) Apparel
($67 billion, 3 percent, $185 million, 6.5 percent)
(10) Household Consumer Goods -- Interior Industry
($56 billion, 7 percent, $250 million, 20 percent)
(11) Machine Tools and Metalworking Equipment
($7.9 billion, 20 percent, $195 million, 30 percent)
(12) Industrial Process Controls
($3.5 billion, 5 percent, $120 million, 8 percent)
(13) CAD/CAM/CAE Systems
($2.5 billion, 15 percent, $1.1 billion, 20 percent)
(14) Processed Foods
($185 billion, 5 percent, $2 billion, 7 percent)
(15) Paper and Paperboard
($56 billion, 3 percent, $600 million, (-)1-(+)2 percent)
(16) Electronic Components
($33.8 billion, 13 percent, $6.2 billion, 20 percent)
(17) Electronics Industry Production and Test Equipment
($17 billion, 7.6 percent, $1.5 billion, 6 percent)
(18) Giftware
($25 billion, 5 percent, $125 million, 15 percent)
(19) Veterinary Equipment and Supplies
($3.2 billion, 25 percent, $200 million, 30 percent)
(20) Automobiles and Light Trucks/Vans
($90 billion, 5-10 percent, $510 million, 10 percent)
(21) Advanced Ceramics
($7.3 billion, 9.6 percent, $65 million, 15 percent)
(22) Pollution Control Equipment
($5 billion, 8 percent, $10 million, 9 percent)
(23) Cosmetics
($14 billion, 5 percent, $64 million, 50 percent)
(24) Health Care Services
($155 billion, 5 percent, $10 million, 10 percent)
(25) Wooden Furniture
($19.2 billion, 10 percent, $86 million, 30 percent)
(26) Air Conditioning and Refrigeration Equipment
($16.7 billion, 5 percent, $115 million, 10 percent)
(27) Made-Up Textile Products
($9 billion, 4 percent, $90 million, 5 percent)
(28) Security Equipment
($1.5 billion, 12 percent, $5 million, 23 percent)
(29) Printing and Graphic Arts Equipment
($3 billion, 12 percent, $65 million, 15 percent)
(30) Coal
($7.4 billion, 2 percent, $755 million, (-)5-(+)2 percent)
JAPANESE GOVERNMENT PROCUREMENT
Of the 5.6 billion SDR (Special Drawing Rights -- 1 SDR is equal to $1.32 as
of July 1991) in Japanese Government purchases of goods and services (the
total public market), about 320 million SDR are open to foreign competition
under the Government Procurement Code of the General Agreement on Tariffs
and Trade (GATT). Government entities are interested in purchasing a wide
range of goods from telecommunications and computer equipment and scientific
and testing instruments to less sophisticated products and supplies.
If you want to sell under the government procurement program, you should
appoint a local agent or representative (local representation, though not
mandatory, is recommended strongly because of short deadlines and the
necessity to submit bids and other documentation in Japanese), be
prequalified by the government agency to whom you wish to sell, and then
attempt to win the tender under competitive bidding practices.
Most Japanese Government entities use permanent lists of qualified suppliers
under a selective tendering system. During the time period from December to
February of each year, an announcement will appear in the official Japanese
Government gazette, the Kampo, with information on procedures and criteria
for becoming a prequalified bidder for a particular agency. In order to be
placed on the lists, suppliers and/or their agents are required to apply
during a specified period prior to the beginning of the fiscal year, usually
sometime in January or February. Foreign suppliers are permitted to apply
through the end of the Japanese Fiscal Year (JFY) ending each March 31.
Specific tender notices are published in the Kampo at various times 50 days
prior to the time of bid. Under the provisions of the GATT Procurement Code,
foreign companies are permitted to bid on specific invitations prior to
qualification if there is sufficient time to complete the qualification
procedures.
To assist your firm in competing for Japanese Government contracts, the U.S.
Department of Commerce has extended its Trade Opportunities Program (TOP) to
disseminate summaries of translated tender announcements. Tender
announcements appear in the Commerce Business Daily on a regular basis.
Tender documents can be obtained directly
from the tender requestor (name and address found at the top of each
Commerce Business Daily listing). However, all Japanese Government tender
documents and all qualifying bids and contracts must be prepared in
Japanese. Nippon Telegraph and Telephone (NTT) tenders are one of the few
exceptions which can be submitted in English. The U.S. Department of
Commerce district offices can help potential U.S. bidders by identifying
firms that can provide translation services. The chances of successfully
bidding on these tenders without some representation in Japan is very
limited.
If you have an agent or representative in Japan, you can contact the
appropriate Japanese Government ministry through it. If not, the following
companies may be of assistance:
Mr. Robert F. Connelly Ms. Eriko Tanaka
Procurement Services Int'l K.K. Procurement Services Int'l, USA
Asahi Sanbancho Plaza #206 31 St. Marks Pl. #14
7-1 Sanban-cho New York, NY 10003
Chiyoda-ku, Tokyo 102 Japan Phone: (212) 674-2587
Phone: 011-81-3-3234-6921 Fax: (212) 541-8350
Fax: 011-81-3-3234-6915
Mr. Tom Frost Mr. Grif Frost
Frost International Corp. Frost International Corp.
3007 31st Avenue 1-11-3 Higashi, Shibuya-ku
Forest Grove, Oregon Tokyo, Japan 150
Phone: (503) 357-6783 Phone: 011-81-3-3499-5745
Fax: (503) 359-5650 Fax: 011-81-3-3499-5074
Mr. Y. Watanabe Mrs. Mie Teno
Vice President Managing Director
Fujikasei Co., Ltd. Deltapoint International Ltd.
Takasa Bldg. 8F 9-20 Ichibancho, Suite 603
4-13-16 Awaza Nishi-ku Chiyoda-ku, Tokyo 102 Japan
Osaka, Japan 550 Phone: 011-81-3-3221-1751
Phone: 011-81-6-532-7431 Fax: 011-81-3-3221-1753
Fax: 011-81-6-532-7435
REGIONAL OUTLOOK OUTSIDE THE TOKYO AREA
Osaka and the Kansai: The Kansai is the region centered around the cities
of Osaka, Kyoto, and Kobe. It boasts a population of 22 million. The six
prefectures comprising the area -- Osaka, Shiga, Nara, Wakayama, Kyoto, and
Hyogo -- account for almost 20 percent of Japan's total economic output.
The Kansai's GNP exceeds $410 billion, which is a figure that represents
approximately 3 percent of the world's output. If classified as a country,
the Kansai would rank above Canada as number seven among the world's largest
economies. Osaka, the largest city in the Kansai with a population of
approximately 4 million, serves as the commercial hub for the entire
region. The Kansai area, and specifically Osaka, is Japan's historical
business center. Several major industries in Japan, including
pharmaceuticals, textiles and apparel, sporting goods, and chemicals, are
concentrated in the Kansai.
The Kansai is also the center for a number of major construction projects.
A recent survey conducted by the Kansai Revitalization Center (KIRC) lists
822 major projects in the Kansai area valued at over 35 trillion yen
(approximately $250 billion). This major project development represents
tremendous opportunities for U.S. companies. These opportunities range from
design and construction services to supply of building materials and resort
and leisure equipment.
Businesses in the Kansai benefit from lower operating costs, and a lower
cost of living, than those in Tokyo. For example, the monthly rent for a
three-room office in Osaka is $670 compared to $2,300 in Tokyo. A typical
condominium in Osaka rents for $800 a month compared with $4,000 in Tokyo.
Osaka is less than three hours to Tokyo by bullet train.
The U.S. Department of Commerce has an office in Osaka and is available to
counsel U.S. companies on business opportunities in the region. The
American Chamber of Commerce in Japan has a Kansai chapter, which has over
300 members. In addition, other groups such as the International Business
Association provide strong networking opportunities.
Nagoya and the Chubu Region: The Chubu region is located in central Japan
and includes the prefectures of Aichi, Gifu, and Mie. Nagoya, located in
the Aichi prefecture, is the largest city in the Chubu area and has a
population of over 2 million. The GDP of the Nagoya area alone is as large
as the Republic of Korea's. The Chubu region is the home of such industrial
companies as Toyota, Noritake, Brother, Makita Power Tools, and Nippon
Denso. This region is currently attracting a significant amount of
attention both domestically and internationally. Plans for a new 24-hour
international airport have begun, and the airport is expected to be
operational by the year 2005. Developments in the auto, aerospace, and new
materials industries are also bringing attention to this area. A number of
U.S. aerospace companies have been making significant investments in the
Nagoya area. Moreover, automobile parts suppliers and other high technology
companies view Nagoya as an excellent base for research and development
centers.
American business people in Nagoya recently created the American Business
Community of Nagoya. This group is similar to the American Chamber of
Commerce in Japan (ACCJ) and seeks to provide self-help for U.S. firms doing
business in this region. To date, the group has nearly 30 members, and
representatives of such U.S. firms as General Dynamics, United Technologies,
and Coca-Cola. The U.S. Department of Commerce recently established a new
office in Nagoya to assist U.S. companies interested in investing in the
area and seeking possible business opportunities in the region.
Fukuoka and the Kyushu-Yamaguchi Region: The Kyushu-Yamaguchi region, lying
700 miles west of Tokyo, has a land area the size of Switzerland and an
economy 1.5 times that of the Netherlands and 2.6 times that of Taiwan.
Local business leaders call Kyushu Japan's "Silicon Island" because of the
semiconductor industry there which accounts for 42 percent of Japan's total
chip output. In addition, a recent movement of the Toyota group to Kyushu,
along with expansion by Nissan, will bring an estimated 10 percent of
Japan's car production to this island within the next five years.
Regional business and political leaders have sought to stimulate economic
growth through a wide variety of innovative development projects, including
high-technology research, waterfront redevelopment, and elaborate resort
projects. Public works projects in the Kyushu-Yamaguchi area will amount to
approximately $36 billion over the coming decade, and the Fukuoka area
resort projects are estimated to be worth $14 billion. Plans are being made
to obtain funding from the national government to start construction of a
major new international airport within the next ten years to serve as a new
hub for western Japan as well as for nearby Asian countries.
Particularly good business prospects in the Kyushu-Yamaguchi region may be
found in the areas of electronics and computers, architecture, design and
construction, and medical equipment and technology. Exhibitions and
seminars are organized by the U.S. Department of Commerce's Fukuoka office
in each of these areas during the course of the year.
Sapporo and Northern Japan: Northern Japan, consisting of Honshu's four
northeast prefectures and the island of Hokkaido, has a gross regional
product larger than $275 billion. This industry-centered region imports
heavily from other parts of Japan, but U.S. products can be extremely
competitive. The secondary and processing sectors need lower priced
American materials and services to survive. Establishing distribution in
this region is much cheaper than in Tokyo. Sapporo, in Hokkaido, lying 700
miles north of Tokyo, is also an important center of commercial activity.
The best sales prospects in northern Japan are home building materials,
major project construction and building materials, food processing machinery
and supplies, agricultural machinery and supplies, and tourism. Exporters
of coal, logs, wood pulp, processed lumber, fish, fish products, feed
grains, and all other agricultural inputs should pay particular attention to
the increasing demand for domestic product substitutes. Hokkaido is a good
test market for recreational and consumer goods and direct mail sales. The
U.S. Department of Commerce office in Sapporo can provide consultative and
facilitative services, temporary work space, simple office services, and
exhibition and seminar space in its display area for American products.
PROMINENT ECONOMIC ORGANIZATIONS IN JAPAN
The American Chamber of Commerce in Japan
Founded in 1948, the American Chamber of Commerce in Japan (ACCJ) has
actively sought to promote the development of commerce between the United
States and Japan. In order to do this, the ACCJ works with business and
government organizations in Japan and the United States to exchange ideas
and opinions and seek resolution of problems and issues affecting the
bilateral relationship. The ACCJ
performs two important functions for its members: (1) it apprises them of
the special problems they will confront while conducting business in Japan
and (2) where possible, assists them in solving those problems. Residing in
Japan is not a requirement for membership.
The ACCJ produces several excellent publications, including the recently
published Trade and Investment in Japan: The Current Environment. Besides
providing an evaluation of the current trade and investment environment in
Japan, this study also identifies the key success factors for those American
companies that have come to prosper in Japan, with the idea that others
could use these concepts and practices to guide future strategies for
Japanese market entry or expansion.
The ACCJ committee structure, through which information is gathered and
disseminated to all members, is the keystone to the ACCJ's operations. For
this reason, active participation in committee activities by ACCJ members is
highly encouraged. Current ACCJ committees exist on the following
subjects: China relations; direct marketing; employment practices; external
affairs; financial services; high technology; independent business; internal
affairs; investment in the United States; investments; licenses, patents,
and trademarks; living in Japan; marketing; membership relations;
nominating; programs; publications; public affairs policy; taxation and
legislation; trade expansion; and Washington relations/Asian-Pacific Council
of American Chambers of Commerce (APCAC). The ACCJ's address is:
The American Chamber of Commerce in Japan (ACCJ)
Fukide Building No. 2
4-1-21 Toranomon, Minato-ku, Tokyo 105, Japan
Phone: 011-81-3-3433-5381
Fax: 011-81-3-3436-1446
Keidanren
Keidanren (Federation of Economic Organizations) was established in 1946.
One of Japan's four main business organizations (the other three being
Nikkeiren, the Japan Committee for Economic Development, and the Japan
Chamber of Commerce and Industry), Keidanren is the most influential in
Japan's economy and industry.
Keidanren's principal functions are to adjust and mediate differences of
opinion among its various member industries and businesses, and to submit
proposals to the government regarding policies designed to stimulate the
economy. It also promotes international exchanges on business matters
between private citizens. To carry out these functions, Keidanren has a
number of permanent committees and consulting organizations, including
committees concerned with general policy, energy, economic cooperation, and
trade policy. It also has ad hoc committees on defense production and space
exploration.
Internationally, Keidanren conducts an active program of economic diplomacy
on a nongovernmental level through conferences with American and European
business leaders. As Keidanren is the spokesperson for big business in
Japan, its proposals and demands have exerted a strong influence in Japanese
political life. Its views are often sought by the Japanese Government and
its recommendations given important consideration. Keidanren's address is:
Keidanren
1-9-4 Otemachi
Chiyoda-ku, Tokyo 100 Japan
Phone: 011-81-3-3279-1441
Keizai Doyu Kai
The Japan Committee for Economic Development (Keizai Doyu Kai) is made up of
business managers and executives of various Japanese corporations. The
committee's purpose is to promote progress and stability in the Japanese
economy by making proposals aimed at benefiting the national economy as a
whole. It avoids taking stands on political issues.
At the time of its establishment in 1946, the committee was composed of
progressive business leaders and industrialists concerned with the problem
of reconstruction and democratizing the Japanese economy. It was intended
to provide an informal forum for developing and advancing new ideas.
Membership has grown to some 1,000 business persons. Various subcommittees
exist, which conduct research and issue recommendations under the guidance
of a board of 200 trustees. The committee has stressed the social
responsibility of business and promoted the cooperation of business and
academia. It also cooperates with similar organizations in other countries
and is particularly concerned with promoting the economic development of
Southeast Asia. Keizai Doyu Kai's address is:
Keizai Doyu Kai
1-4-6 Marunouchi
Chiyoda-ku, Tokyo 100 Japan
Phone: 011-81-3-3211-1271
JAPANESE TESTING, STANDARDS, AND CERTIFICATION
One of the most important areas of concern for your company is meeting the
requirements of Japanese testing, standards, and certification procedures
which cover a wide range of product sectors. Unfortunately, obtaining
information in these areas from outside of Japan is difficult. Japanese
approval procedures are often slow and cumbersome and can be discouraging to
those unwilling to make a major commitment of their time and energy.
However, significant progress has been made in specific product areas in the
last few years, and steps to simplify the system continue. Problems with
Japanese standards and certification systems generally have fallen into one
of three categories:
Lack of Transparency: Some of the committees that draft Japanese standards
have shown reluctance to allow foreign participation. As
a result, foreign firms whose products could be affected by new standards
have had no meaningful input into the development of those standards.
Furthermore, in many cases foreign firms do not learn the details of the new
standards until after Japanese firms represented on the committees have, and
thus the foreign firms lose critical lead time retooling to comply with the
new standards. This situation is beginning to improve as more drafting
standards committees are opened to participation by qualified foreigners.
Lack of Acceptance of Foreign Test Data: In the past, Japanese authorities
refused to accept the results of tests conducted by manufacturers or
independent U.S. test laboratories. Companies seeking certification had no
choice but to submit to testing and inspection by Japanese authorities,
exposing certain proprietary information. The Ministry of International
Trade and Industry (MITI) now accepts test results from U.S. testing
laboratories for certification of electrical appliances. A handful of U.S.
labs have received Japanese Government approval to inspect factories and
give type approval to U.S. products. MITI has designated the following U.S.
testing laboratories to certify products as meeting Japanese safety and
quality requirements:
DSET Laboratories, Inc. Applied Research Laboratories
Box 1850 of Florida, Inc.
Black Canyon Stage 1 5371 N.W. 161st Street
Phoenix, AZ 85029 Miami, FL 33014
Phone: (602) 465-7356 Phone: (305) 624-4800
ETL Testing Laboratories, Inc. Hazelton Laboratories, Corp.
Route 11 9200-T Leesburg Pike
Industrial Park Vienna, VA 22180
P.O. Box 2040 Phone: (703) 893-5400
Cortland, NY 13045
Phone: (607) 753-6711
Underwriters Laboratories, Inc.
1285 Walt Whitman Road
Melville, NY 11747
Phone: (516) 271-6200 ext. 877 or 614
Underwriters Laboratories (UL) is the only U.S. testing facility that has
received MITI designation to conduct product testing for type approval and
to approve products under the voluntary Japan Industrial Standards (JIS)
system, allowing the product to be marked with a JIS symbol.
Progress also has been made in the acceptance of foreign-generated test data
for health care products. Japan now accepts the results of all pre-clinical
tests conducted outside of Japan, if those tests are conducted according to
Japanese test protocols. However, the Ministry of Health and Welfare (MHW)
is still reluctant to approve products based on clinical tests performed
outside of Japan, even if these tests are conducted on Japanese people.
Test data developed in Japan is required for medical implantable or invasive
products or devices and pharmaceuticals.
Lack of Harmonization with International Standards: Japanese standards
often differ from international standards or from standards prevalent
elsewhere. While some changes have been implemented, Japanese standards
continue to deviate from international standards in many instances. The U.S.
Government continues to raise discriminatory standards cases with the
Japanese authorities.
Japan also has a system of voluntary government and industry marks with
specific standards requirements. Japan Industrial Standards (JIS), Japan
Agricultural Standards (JAS), and other quality marks are important for
winning consumer acceptance for a product and are highly recommended, but
can create difficulties for foreign suppliers in those cases where they
deviate from international standards.
A JIS mark on your product is a quality certification mark in Japan. It
means that products with JIS marks satisfy the quality level set by
corresponding Japanese Industrial Standards. Although a JIS mark is not
mandatory, it is recognized by Japanese consumers as signifying good product
quality. JIS mark approval is conducted by the Japanese Government on a
factory-by-factory basis. Thus, the quality is indirectly guaranteed by the
Japanese Government.
Complying with Japanese standards and obtaining import certification can be
arduous at times. Your company should work closely with your
agent/representative/importer in Japan in order to facilitate this process.
Much information on Japanese standards is only available through the
appropriate Japanese governmental ministry and/or only exists in written
form in the Japanese language. Therefore, it is often up to your
representative in Japan to supply your firm with this type of information.
Your agent/representative/distributor should carefully study the products to
be imported and all regulations concerned. All relevant information should
be passed onto your company since goods not conforming to regulations will
not be certified to enter Japan. Furthermore, there are cases where a
product is controlled by more than one law, or different laws apply to
products of the same group, since each law has its legislative objective.
Technical regulations are concerned not only with technical specifications
of a product itself but also with packaging, marking or labeling
requirements, testing, transportation and storage, installation, etc. Your
company needs to identify certification requirements for your product if
appropriate.
Some Japanese standards and certification information is available in the
United States and is in English. To determine whether or not Japanese
standards on your product exist in the United States, please contact the
following organization:
U.S. Department of Commerce
National Center for Standards and
Certification Information
National Institute of Standards
and Technology
Administrative Building, Room A629
Gaithersburg, MD 20899
Phone: (301) 975-4040
The National Center for Standards and Certification Information (NCSCI)
provides information on U.S., foreign, and international voluntary
standards; government regulations; and rules of certification for
nonagricultural products. The NCSCI serves as a referral service and focal
point in the United States for information about standards and
standards-related information. It responds to requests for information by
identifying relevant standards and/or regulations. Searches are made with
the aid of various indexes, by contacting professional and
standards-developing organizations, and through communicating directly with
foreign standards bodies. The requester is referred to the appropriate
standards-developing organization for additional (technical) information
and/or copies of the document in question. NCSCI does not provide copies of
standards.
The following is one private sector organization in the United States that
has English translations of many Japanese standards for purchase:
The American National Standards Institute
11 West 42nd Street, 13th Floor
New York, NY 10036
Phone: (212) 642-4900
Your product must be adapted to metric standards. The Office of Metric
Programs of the U.S. Department of Commerce provides exporters with guidance
and assistance on foreign metric import regulations and on matters relating
to U.S. transition to the metric system. It can also give referrals to
state metric contacts. For information, call (202) 377-3754.
Another source of information on various Japanese standards and regulations
is the publication Standards and Certification Systems in Japan -- Measures
for Improving Market Access, which is produced by the Japanese
Intra-Governmental Council on Standards and Certification Systems (Printing
Bureau, Ministry of Finance). This publication is available in the United
States from:
OCS America, Inc.
5 East 44th Street
New York, NY 10017
Phone: (212) 599-4502
The Japan Standards Association (JSA) has established Kikaku Net, an on-line
database which was put into operation in October 1989. The system includes
two comprehensive files, one for domestic and one for international/overseas
standards which have cross reference fields for each other. Many of the
fields are supported both in Japanese and English so retrieval is possible
in both languages. This system is a convenient tool for your business in
identifying existing Japanese standards and the over 200 Japanese
manufacturer's associations responsible for drafting specific industry
standards. Inquiries on Kikaku Net should be directed to:
Overseas Standards Center
Japan Standards Association
4-1-24 Akasaka
Minato-ku, Tokyo 107 Japan
Phone: 011-81-3-3583-8001 (ext. 245)
Fax: 011-81-3-3584-5159
Questions on access to Kikaku Net should be directed to:
Customer Service Manager
Database Business Department
Japan Information Processing Service Co., Ltd.
2-4-24 Toyo, Koto-ku, Tokyo 135 Japan
Phone: 011-81-3-35690-3202
The Building Center of Japan is a Japanese quasi-government organization
which deals with Japanese construction standard issues. If your firm wishes
clarification regarding Japanese construction standards, contact:
The Building Center of Japan
3-2-2 Toranomon
Minato-ku, Tokyo 105 Japan
Phone: 011-81-3-3434-7155 (International Section)
Fax: 011-81-3-3431-3302
The following two organizations have been designated the General Agreement
on Tariffs and Trade (GATT) national inquiry points in Japan for standards
information:
Standards Information Service
First International Organizations Division
Economic Affairs Bureau
Ministry of Foreign Affairs
2-2-1 Kasumigaseki, Chiyoda-ku, Tokyo 100 Japan
The Standards Information Service at the Ministry of Foreign Affairs mainly
handles inquiries in the fields of drugs, cosmetics, medical devices,
foodstuffs, food additives, telecommunications facilities, motor vehicles,
ships, aircraft, and railway equipment. It does not answer inquiries
concerning Japanese Industrial Standards (JIS) which are handled by the
Japan External Trade Organization (JETRO).
Standards Information Service
Information Service Department
Japan External Trade Organization
2-2-5 Toranomon, Minato-ku 107
Tokyo, Japan
The Standards Information Service at the Japan External Trade Organization
mainly handles inquiries in the fields of electric equipment, gas
appliances, measurement scales, foodstuffs, food additives, etc. Those
inquiries concerning JIS on medical devices, motor vehicles, ships,
aircraft, and railway equipment are also handled by JETRO.
INTELLECTUAL PROPERTY PROTECTION
If you are seeking to develop trade or to license your technology in Japan,
you should take the steps necessary to obtain and protect your rights in
patents, trademarks, copyrights, designs, trade secrets, and other
intellectual property rights in Japan. Failure to do so can limit your
potential for success.
Japan and the United States are signatories of the Paris Convention for the
Protection of Industrial Property and other treaties governing the
protection of industrial property rights. These treaties, however, do not
automatically protect patents or trademarks your business has acquired in
the United States. You will have to file applications for patents or for
trademark registrations in Japan, but your U.S. rights can provide certain
advantages if applications are filed promptly in Japan. A U.S. patent or
trademark attorney, as appropriate, can provide advice, but you will also
need to hire a Japanese attorney, preferably one with which your U.S.
attorney has an established relationship, to prosecute the application for a
patent or for registration of a trademark.
Japan and the United States belong to the Berne Convention for the
Protection of Literary and Artistic Works and to the Universal Copyright
Convention. These conventions provide automatic protection for copyrighted
works, including computer programs, originating in either country or
produced by authors of either country. The owner of a U.S. copyright which
is infringed in Japan would be able to sue the infringer in Japanese
courts. Registration for copyrighted works is not required. Japan does
provide for voluntary registration of computer programs and musical works,
which simplifies the evidence that must be produced in court.
U.S.-produced semiconductor chips are protected in Japan under the Japanese
Law Concerning the Circuit Layout of a Semiconductor Integrated Circuit.
Under this law, foreign chip layout-designs should be entered in the
registry maintained by the Industrial Property Cooperation Center.
Obtaining and protecting intellectual property rights in Japan can be
time-consuming and costly. While the cost or time involved in acquiring
intellectual property rights might seem prohibitive, lack of such rights
would permit competitors both in and outside of Japan to copy your product
or production process which you want to market or license in Japan and to
compete with your firm in the Japanese market. Even when intellectual
property rights have been acquired, pirating of technology and designs can
occur in Japan, as it does in many countries, including the United States.
Each company in a trading or licensing agreement should understand clearly
what its rights and obligations are with respect to the intellectual
property rights owned or acquired by the other. Such a clear understanding
helps to create a good rapport based on mutual trust, thereby ensuring the
success of the trading or licensing agreement.
In 1989, 1990, and 1991, Japan was included on the "Watch List" under the
so-called Special 301 provisions of the Omnibus Trade and Competitiveness
Act of 1988, because of deficiencies in its intellectual property laws and
problems of a practical nature involving protection of patents, copyrights,
and trademarks.
Patents: Japan's patent law differs from U.S. patent law in several
important ways. First, under Japan's patent law, patents are granted to the
first inventor to file an application claiming a particular invention,
rather than to the first to invent as is done in the United States. Under
the Paris Convention, the date on which a U.S. applicant filed his U.S.
application will become the Japanese filing date so long as the
corresponding application, in Japanese, is filed in Japan within one year of
the U.S. filing date. Prompt filing in Japan is also important because
printed publication of a description of the invention anywhere in the world,
or knowledge or use of the invention in Japan, prior to the filing date of
the Japanese application would preclude the grant of a patent on the
application. Second, unlike the United States, where examination of patent
applications is automatic, an applicant must request examination of his
patent application in Japan but has seven years in which to do so. As is
true in most countries of the world, but not in the United States, all
patent applications are published in Japan 18 months after filing. If,
during the examination, the Japanese Patent Office (JPO) finds no impediment
to the grant of a patent for a particular invention, it publishes the patent
application a second time, including any changes that have been made during
the examination. Following this second publication of the application, any
party may oppose the grant of a patent by demonstrating that the standards
for patentability are not met by the invention.
Japan and the United States are signatories to the Patent Cooperation Treaty
(PCT), which is administered by the World Intellectual Property
Organization. Under the PCT, an applicant can file a single "international
application" designating the PCT member countries in which a patent is
sought. The international application has the same effect as filing
individual national applications in each of those countries. U.S. nationals
can file an international patent application with the U.S. Patent and
Trademark Office of the U.S. Department of Commerce and designate Japan as
one of the countries in which a patent is sought. The international patent
application under this program does not obviate the need to file a separate
patent in Japan. However, it does provide the applicant with certain
advantages regarding time limits and translations.
It takes a long time to obtain a patent in Japan. Like patent offices in
other countries, the JPO does not begin examination until 18 months after a
patent application is filed, even if examination is requested at the time of
filing. The shortage of patent examiners adds to the problem as does the
number of patent applications filed by Japanese companies, causing a
significant backlog of applications awaiting examination. An applicant can
request accelerated examination under certain circumstances, but this does
not help reduce the period of examination in ordinary cases. The JPO has
added some examiners to its staff and has begun to hire subcontractors to
perform initial searches of patent applications. In December 1990, the JPO
inaugurated the world's first electronic filing system for patent
applications. These measures, however, have yet to result in substantial
reductions in the time required to examine a patent application and grant
the patent.
It must be emphasized that correct translation is necessary in the patent
application process. The JPO shows little sympathy towards translation
mistakes or typos. Companies should ensure that translations of their
applications are perfect.
The average time required to examine a patent application in Japan was 32
months in 1990. That is in addition to the 18 months prior to initial
publication and the 2 months following publication for opposition,
indicating that, on average, it took 52 months to obtain a patent in Japan
(assuming there were no oppositions filed). During the examination period,
no effective legal protection will exist. By comparison, the average period
required for the U.S. Patent and Trademark Office to process a patent
application is 18 months. In the U.S.-Japan Structural Impediments
Initiative (SII), the Government of Japan has agreed to reduce the period
required for examination to 24 months within 5 years. If the application is
uncontested in Japan and all requirements are met, the patent is granted and
valid for 15 years from the date the application is published (but not more
than 20 years from the date the application was submitted).
Trademarks: To provide for protection for the brand names of products,
Japan enacted the Trademark Law of 1959. Under the law, the first person to
file an application for a particular trademark is entitled to the
registration of the mark in connection with the particular class of goods.
Japan has just enacted a new law providing for the registration of service
marks which comes into effect in April 1992. Currently, service marks are
protected only under Japan's Unfair Competition Law. The trademark law
permits the owner of a well-known foreign trademark or service mark to
oppose the registration of a mark if it can demonstrate that the mark is
confusingly similar to its own. One common mistake to avoid is to trademark
just your product. You should also trademark the packaging and/or
promotional materials that go along with your product. A trademark
registration is valid for ten years from the date of registration and can be
renewed indefinitely for ten year periods so long as the trademark continues
to be used. If a mark has not been used for a period of three years, it can
be canceled.
On February 20, 1990, Japan agreed to the Nice Agreement Concerning the
International Classification of Goods and Services for the Purposes of the
Registration of Marks. As is the case with patent applications, a resident
agent (usually a lawyer or patent agent) must prosecute the trademark
application. As with the processing of patent applications, Japan's
trademark registration process is very slow. It takes an average of 4 years
to process a trademark registration in Japan, compared with an average of 13
months in the United States. The only protection available for a trademark
in Japan prior to registration is under the Unfair Competition Law. Under
this law, the owner of the mark must demonstrate that the mark is well-known
in Japan and that consumers will be confused by the use of an identical or
similar mark by the unauthorized user.
Copyrights: Japan's copyright law is administered by the Copyright Office
of the Cultural Affairs Agency, Ministry of Education. Under the Berne
Convention for the Protection of Literary and Artistic Works and the
Copyright Convention, Japan provides protection for copyrighted works,
including computer programs, for nationals of member states of those
conventions and/or works first published in member countries. The
protection lasts for the life of the author plus 50 years or 50 years from
publication in the case of juridical entities. Registration is not required.
Japan amended its copyright law in April of 1991 to extend protection for
sound recordings from 30 to 50 years, to provide a rental right for foreign
phonogram producers, and to provide criminal penalties for copying
previously unprotected U.S. and certain other foreign-produced sound
recordings released from 1968 to 1978. The one-year prohibition against
rental starts to run from the date of first sale anywhere in the world, not
from the date of first sale in Japan; there is no protection for foreign
sound recordings produced before 1968.
In 1988, Japan enacted legislation to facilitate the prosecution of
suspected video pirates, although loopholes remain. The law must be
enforced more rigorously if it is to be effective in curbing abuses which
have cost U.S. owners of rights in video recordings an estimated $200 to
$250 million each year.
Semiconductor Chip Layout and Design: The layout-designs of U.S.-produced
semiconductor chips are protected in Japan under the Japanese Law Concerning
the Circuit Layout of a Semiconductor Integrated Circuit. This law is
administered by an independent registration agency, the Industrial Property
Cooperation Center (IPCC). Under the Japanese law, foreign chip
layout-designs may be registered in the registry maintained by the IPCC.
The duration and the level of the protection is essentially the same as
under the U.S. Semiconductor Chip Protection Act. Japanese layout-designs
are eligible for protection in the United States under orders issued by the
Assistant Secretary and Commissioner of Patents and Trademarks.
Utility Model and Design Protection: The Japanese utility model system
parallels the patent system. It serves as an incentive to individual
inventors and small and medium-sized businesses (which lack large budgets
for research and development) to invent. While novelty remains an important
requirement, the degree of inventiveness for a utility model is less than
that required for a patent. Devices are protected as utility models, but
not methods. Application procedures are similar to those for patents, but
the period of protection is 10 years from the date of publication of the
application and no more than 15 years from the date of application.
Japan also protects registered designs under a system modeled on the
British. To be registered, a design must be industrially useful, novel, and
creative. The design right lasts 15 years from the date of registration.
The application for registration is similar to that for patent applications.
Trade Secrets: Japan enacted amendments to the Unfair Competition Law in
1990 which provide some measure of protection for theft of trade secrets
such as know-how, customer lists, sales manuals, and experimental data. The
law provides for injunctions against wrongful use, but not against use by
innocent third party transferees of trade secrets.
If you are interested in protecting your product in Japan, you will need a
Japanese lawyer (bengoshi) or patent agent (benrishi). Consult with your
attorney here in the United States, the Martindale-Hubbell Law Directory, or
for a list of selected lawyers and patent attorneys, contact the Japan
Export Information Center (JEIC) at (202) 377-2425. Other English-language
intellectual property protection publications available include:
"Patent Protection or Piracy - A CEO Views Japan," Harvard Business Review.
September/October 1990, pp 58-67. Reprint Product Information and Orders:
(617) 495-6192.
Patent Application Paperless System: Guide Book. Japanese Patent Office
(1990).
Guideline for Accelerated Examination and Accelerated Appeal Examination
System for Working-Related Patent (or Utility Model) Applications. Japanese
Patent Office (July 1989).
Effect of the Japanese Patent System on American Business: Subcommittee
Hearing. U.S. Government Printing Office (June 24, 1988).
Guide to Industrial Property in Japan. Japanese Patent Office (1988).
Outline of Japanese Trademark System: An Introduction to Foreigners.
Japanese Patent Office (1986).
Industrial Property Rights in Japan. Japan External Trade Organization
(Revised 1981).
EXPORT FINANCING
Export-Import Bank of the United States
The Export-Import Bank of the United States (Eximbank) can provide export
financing assistance to American companies through the following programs:
Working Capital Guarantee Program: This program helps small businesses
obtain critical pre-export financing from commercial lenders. Eximbank will
guarantee 90 percent of principal and a limited amount of interest on loans
or revolving lines of credit extended to eligible exporters. The funds may
be used for such pre-export activities as buying raw materials or foreign
marketing. For more information, contact the U.S. Division at (202)
566-8819.
Export Credit Insurance: Through its agent, the Foreign Credit Insurance
Association, Eximbank offers insurance which covers political and commercial
risks on export receivables. For more information, contact the Insurance
Division at (202) 566-8955.
(1) The New-to-Export Policy is available to firms just beginning to export
or with average annual export sales of less than $750,000 for the past
two years. The policy offers enhanced coverage and a lower premium than
usually found in regular insurance policies.
(2) The Umbrella Policy is available to commercial lenders, state agencies,
export trading companies, and similar organizations to insure export
receivables of their small and medium-sized clients.
(3) The Bank Letter of Credit Policy insures commercial banks against loss
on irrevocable letters of credit issued by foreign banks for U.S.
exporters.
(4) The Multi-Buyer Policy insures all or a reasonable spread of an
exporter's short- or medium-term export credit sales.
(5) The Financial Institution Buyer Credit Policy insures individual
short-term export credits extended by financial institutions to foreign
buyers.
(6) The Short-Term Single-Buyer Policy and the Medium-Term Single-Buyer
Policy allow exporters to insure their receivables against loss due to
commercial and specified political risks on a selective basis.
(7) Lease Insurance Policies offer a lessor the opportunity to expand its
overseas leasing program by providing comprehensive insurance for both
the stream of lease payments and the fair market value of the leased
products.
Guarantee Program: This program provides repayment protection for private
sector loans to creditworthy buyers of U.S. capital equipment and services
exports. Coverage is available for loans of up to 85 percent of the U.S.
export value, with repayment terms of one year or more. Eximbank's
guarantee is available for fixed or floating rate export loans in U.S.
dollars or convertible foreign currencies. For more information, contact
the Export Finance Group at (202) 566-8187.
Loan Program: This program provides competitive, fixed interest rate
financing for U.S. export sales facing foreign competition backed by
subsidized financing. Eximbank extends direct loans to foreign buyers of
U.S. exports and intermediary loans to responsible parties that make loans
to foreign buyers. Coverage is available for loans of up to 85 percent of
the U.S. export value. The interest rates are the official minimum matrix
rates agreed on by members of the Organization for Economic Cooperation and
Development (OECD) and depend on the repayment period and the classification
of the buyer's country. For more information, contact the Export Finance
Group at (202) 566-8187.
Engineering Multiplier Program: This program stimulates the exports of U.S.
architectural, industrial design, and engineering services. Eximbank will
extend loans or guarantees up to 85 percent of the U.S. export value of
services involving projects with the potential of generating U.S. export
orders of $10 million or double the original export contract, whichever is
greater. It also will guarantee commercial financing for approved
project-related costs in the host country of up to 15 percent of the U.S.
export value. For more information, contact the Engineering Division at
(202) 566-8802.
Operations and Maintenance Contracts Program: This program helps U.S. firms
compete for overseas contracts to operate and maintain new or established
projects. Eximbank will provide loans or guarantees for up to 85 percent of
the U.S. export value of operations and maintenance transactions with
repayment terms of up to five years. The contract must provide a long-term
benefit to the owner, such as training local personnel to take over the
operation or establishment of permanent procedures to assure good operation
of the project. For more information, contact the Engineering Division at
(202) 566-8802.
Foreign Credit Insurance Association
The Foreign Credit Insurance Association (FCIA) helps U.S. exporters
shipping on short-term credit (up to one year) to be assured of receiving
payment while extending appropriate credit terms. As an agent of Eximbank,
it insures U.S. companies against the risk of nonpayment by foreign buyers
for commercial and political reasons. The insurance can cover 90 percent of
the commercial risks and 100 percent of the political risks or 95 percent of
all risks, a decision that is made by the policyholder. For more
information, contact FCIA at (212) 306-5000.
The Small Business Administration
The Small Business Administration (SBA) can provide export financing
assistance to American companies through the following programs:
Export Revolving Line of Credit Program: This program guarantees loans up
to $750,000, the proceeds of which can be used to finance foreign market
development or labor and materials needed to manufacture or wholesale for
export. The maximum maturity is 18 months. For more information, contact
the Office of Financial Assistance at (202) 205-6497.
International Trade Loan Guarantee Program: This program offers small
businesses that can significantly expand existing export markets, develop
new export markets, or those adversely affected by import competition, loan
guarantees up to $1 million for facilities and equipment and up to $250,000
for working capital. Maturities of loans may extend up to 25 years. For
more information, contact the Office of Financial Assistance at (202)
205-6497.
Small Business Investment Companies: Licensed by SBA, firms whose
investment strategies include export activities may receive equity capital
or term working capital in excess of SBA's $750,000 statutory limit. For
more information, contact the Investment Division at (202) 205-6734.
Business Loan Guarantee Program: Financing for fixed-asset acquisition or
general working capital purposes may be obtained; the program encourages
private lenders to make loans of up to $750,000 to borrowers who could not
borrow on reasonable terms without government help. For more information,
contact the Office of Financial Assistance at (202) 205-6490.
The Overseas Private Investment Corporation
The Overseas Private Investment Corporation (OPIC) can provide export
financing assistance to American companies through the following programs:
Finance Programs: Medium- to long-term financing for overseas investment
projects is made available through loan guaranties and direct loans. Loans
generally range up to $6 million and are reserved exclusively for projects
significantly involving U.S. small businesses or cooperatives. Guarantees,
as large as $50 million, are available for projects sponsored by any U.S.
company regardless of size. OPIC's financing commitment may range up to 50
percent of total project costs for new ventures and up to 75 percent for
expansion of existing successful operations, with final maturities of 5 to
12 years or more. A special small contractor's guarantee program is also
available. For more information, contact Public Affairs at (202) 457-7087.
Lease Financing Program: This program offers loans and guarantees to
foreign leasing companies in which there is a significant U.S. private
business interest. Terms of the guarantee are typically from four to seven
years. For more information, contact Public Affairs at (202) 457-7087.
Small Contractor's Guarantee Program: This program will guarantee an
eligible financial institution for up to 75 percent of an on-demand standby
letter of credit or other form of payment guarantee issued on behalf of a
small business construction or service contractor. For more information,
contact Public Affairs at (202) 457-7087.
The U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) can provide export financing
assistance to American companies through the following programs:
Export Credit Guarantee Programs: These programs are designed to expand
U.S. agricultural exports by stimulating U.S. bank financing of foreign
purchases. The programs operate in cases where credit is necessary to
increase or maintain U.S. exports to a foreign market and where private
financial institutions would be unwilling to provide financing without a
guarantee. These programs guarantee letters of credit from foreign
financial institutions against default. For more information, contact the
USDA at (202) 720-4221.
Market Promotion Program: Authorized by the Food, Agricultural,
Conservation, and Trade Act of 1990 and administered by USDA's Foreign
Agricultural Service, the Market Promotion Program promotes a wide variety
of U.S. commodities in almost every region of the world. Surplus stocks or
funds from the Commodity Credit Corporation are used to partially reimburse
agricultural organizations conducting specific foreign market development
projects for eligible products in specified countries. For more
information, contact Marketing Operations at (202) 720-5521.
Japanese Entities
The Export-Import Bank of Japan (JEXIM): In order to increase Japan's
imports, the JEXIM has expanded the scope of eligible borrowers for
low-interest financing. Products of American companies are eligible for the
Japanese Government import credit program. For information, contact:
The Export-Import Bank of Japan The Export-Import Bank of Japan
375 Park Avenue, Suite 3601 2000 Pennsylvania Ave., N.W.
New York, NY 10152 Suite 3350
Phone: (212) 888-9500 Washington, DC 20006
Phone: (202) 331-8547
The Japan Development Bank (JDB): The JDB has sharply increased
low-interest financing offered to foreign companies for import-related
facilities in Japan as well as for direct investment in Japan by U.S.
companies. For information, contact:
The Japan Development Bank The Japan Development Bank
Center for Promotion of Direct Center for Promotion of Direct
Investment in Japan Investment in Japan
1101 17th Street, N.W. 575 Fifth Avenue, 28th Floor
Suite 1001 New York, NY 10017
Washington, DC 20036 Phone: (212) 949-7550
Phone: (202) 331-8696
The Export-Import Insurance Division of the Ministry of International Trade
and Industry (EID/MITI): EID/MITI, which began operations in 1950, insures
repayment of export credits. EID/MITI insurance enables commercial banks,
which normally would be unwilling to assume the risk of certain types of
financing, to fund overseas projects. EID/MITI has a wide range of short,
medium, and long-term insurance programs for Japanese and non-Japanese
exporters, importers, and investors. For more information, contact:
Ministry of International Trade and Industry
Export-Import Insurance Division
1-3-1, Kasumigaseki
Chiyoda-ku, Tokyo 100, Japan
In May 1991, the Export-Import Bank of the United States reached an
agreement for cooperation with the financial institutions of the Government
of Japan (JEXIM, JDB, and EID/MITI) to advance mutual objectives in: (1)
expanding the role of exports in the growth of global trade, (2)
facilitating the flow of trade and investment capital to developing
countries, (3) assisting cooperation between suppliers and banks of Japan
and the United States, and (4) increasing the volume of exports from the
United States to Japan and other countries. It is expected that the
cooperative application of financing support by the respective agencies will
enable projects to be financed which otherwise could not proceed for lack of
complete capital resources. In particular, it is expected that U.S. exports
will benefit from more effective access to financing supported by the
Japanese agencies.
CUSTOMS CLEARANCE
Customs Documentation: While customs procedures have been simplified in
recent years, a number of documents are still required for clearance through
customs. These include: (1) for import quota items, an import license,
usually valid for four months from date of issuance; (2) an Import
Declaration Form (Customs Form C 5030); (3) shipping documents such as a
commercial invoice, packing list, and an original and signed bill of lading,
or, if shipped by air, an air waybill; (4) a certificate of origin if the
goods are entitled to favorable duty treatment (preferential or GATT rates;
in practice, shipments from the United States are routinely assessed the
GATT or "temporary" rates without a certificate or origin); (5) any
additional documents necessary as proof of compliance with relevant Japanese
laws and standards regulations. To be certain that all required
documentation is provided at the time your shipment arrives in Japan,
consult with your agent/importer.
Commercial Invoice: All shipments regardless of value require at least
two copies of the commercial invoice. The invoice must be on shipper's
letterhead and signed by the shipper or an approved representative.
This document is used to determine the value of goods being imported and
should include: the complete name and address of the shipper, full
description of goods and tariff classification, number of units shipped,
unit price, total price, and country or origin of goods.
Packing List: A packing list is recommended and should provide the
following information: exact description of all items in the shipment,
the gross and net weight of each package, the exterior measurements of
each package, the total number of shipping containers, and gross weight
and gross measurement. Units of measure must be in metric on both
documents and goods.
Bill of Lading: Three signed original bills of lading should be sent
through banking channels, and at least two unsigned copies should be
forwarded to the consignee. For goods sent by air, a standard set of
ten (one original and nine copies) should be made available.
Certificate of Origin: A certificate of origin is required only when
the goods are to be granted duty concessions under GATT or the
Generalized System of Preferences. Such documents are often
authenticated by a local chamber of commerce or by a Japanese consular
or diplomatic official.
Import License: Most goods now qualify as "freely importable" and do
not require an import license. The only exception is for those
commodities falling under import quotas in which case the Japanese
importer would obtain the license (see section on quotas).
Packing, Marking, and Labeling: Straw packing materials are prohibited.
The Japanese Measurement Law requires that all imported products and
shipping documents show metric weights and measures. There is no law
requiring display of the identity of the place of origin. However, if
labels indicating origin are determined to be false or misleading, the
labels must be removed or corrected. Otherwise the goods will be returned
to country of origin. False or misleading labels which display the names of
countries, regions, or flags other than the country of origin, and/or names
of manufacturers or designers outside the country of origin are not
permissible.
There are no generic regulations for the marking of packages, but certain
goods such as food, drugs, cosmetics, clothing, and electrical appliances
are covered by specific regulations outlined, respectively, in the Food
Sanitation Law, the Pharmaceutical Affairs Law, ordinances of the Ministry
of Health and Welfare, and the Electrical Appliance Control Law. As such
regulations apply to specific products, it is important to work with a
prospective agent/importer to ensure your product meets requirements.
In general, most labeling laws are not required at the customs clearance
stage, but at the point of sale. Consequently, it is most common for
Japanese importers to affix a label before or after clearing customs.
Health and Sanitary Requirements -- Inspection Certificates: Japanese
health and sanitary regulations are strictly enforced. All imported plants
and soils, animals, meat, and viscera of animals must be accompanied by a
phytosanitary inspection certificate issued by the government of the
exporting country attesting that such shipments are free from infectious
materials or diseases. Additional information is available from the Animal
and Plant Health Inspection Service, U.S. Department of Agriculture,
Hyattsville, MD 20782, (301) 436-8590 (Veterinary Services) and (301)
436-8537 (Plant Protection and Quarantine).
Japan's Food Sanitation Law requires that an Import Notification Form must
be submitted for all food products at the time of import to ensure all
standards governing foodstuffs have been met. The use of chemicals and
other additives in foods is severely restricted in Japan. The additive
regulations follow a "positive list" approach which indicates only those
additives which are permitted, their maximum tolerable amount, and the foods
in which the additives may be used. Cosmetics are governed by similar
restrictions covering permissible ingredients. Additional information on
specific regulations is available through the U.S. Department of
Agriculture, Office of Food Safety and Technical Services at (202) 720-9408,
or the U.S. Department of Commerce, Japan Export Information Center at (202)
377-2425.
Import Quotas: Japan has in effect two quota systems: a quantity allocated
quota and a tariff quota. The quantity allocated quota is applied to
imports of some dairy products, fish, grain staples, and coal. Import of
these items requires an Import Quota Certificate issued by the Ministry of
International Trade and Industry through an import notice system granting
allocation twice a year. The quota certificate is valid for four months.
Once the certificate is obtained, an application for approval is then made
to an authorized foreign exchange bank which issues the import license.
A tariff quota is in effect for cheese, maize, oats, malt, preparations of
cocoa without sugar, some tomato products, pineapples, some alcohol
materials used as base of alcoholic beverages, leather, and leather
footwear. For items subject to an import tariff quota, a lower primary duty
rate is applied until the quantity exceeds the quota threshold at which time
a higher duty is assessed. To apply for the primary duty rate an importer
must obtain a quota allocation in advance from the Ministry of International
Trade and Industry. Current quota volumes and duty rates are listed in the
yearly publication of the Japanese tariff schedule.
Tariffs: According to the Japanese Government, the average tariff is now
one of the world's lowest at 3.4 percent. However, import duties on some
agricultural items and certain manufactured goods remain relatively high.
As part of their import incentive program, the Japanese expanded the list of
duty-free manufactured products in April 1990 by 1,004 items and reduced the
tariff on four more. Consequently, almost all machinery imports are now
tariff free.
Tariffs are administered by the Customs Bureau of the Ministry of Finance.
Japan is a member of the Harmonized System Convention and therefore shares
the same classification system as the United States up to six-digits.
Duties are assessed on the c.i.f. value (cost, insurance, and freight) at ad
valorem or specific rates, and in a few instances are charged a combination
of both.
Japan's tariff schedule has four columns: general, GATT, preferential, and
temporary. Goods from the United States are charged GATT rates unless a
lesser temporary rate has been instituted. Japan's preferential system of
tariffs grants lower or duty-free rates to products imported from developing
countries.
In addition to the customs duty, a 3 percent consumption tax (general excise
tax) (6 percent on autos) is levied on all goods sold in Japan and payment
is required at the time of import declaration. The consumption tax is
assessed on the c.i.f. value of the product plus the import duty. Refer to
the section on taxation for more information.
Duties and consumption tax are payable when making an import declaration at
the time of customs clearance by the importer. The Import Declaration Form
(Customs Form C 5030) is filled out by the importing company and is used as
an import declaration as well as a tax payment declaration form.
Sample and Advertising Materials: Japan is a member of the International
Convention to Facilitate the Importation of Commercial Samples and
Advertising Materials under the ATA Carnet System. Use of a carnet allows
goods such as commercial and exhibition samples, professional equipment,
musical instruments, and TV cameras to be carried or sent temporarily into a
foreign country without paying duties or posting bonds. A carnet should be
arranged for in advance by contacting a local office of the United States
Council for International Business or the New York office at (212)
354-4480. Fees are based on the value of goods to be shipped. Processing
time takes generally five business days.
Advertising materials, including brochures, films, and photographs, may
enter Japan duty free. A commercial invoice for brochures and literature
for free distribution must have either the actual or estimated value of the
cost of production. Do not use the term "no charge."
Articles intended for display at trade fairs and similar events are also
permitted to enter duty free but are required to be reexported within one
year. A commercial invoice for these goods should be marked "no commercial
value, customs purposes only" and "these goods are for exhibition and are to
be returned after conclusion of the exhibition."
Free Trade Zones and Bonded Areas: Japan has one free trade zone at Naha on
Okinawa. In addition, there are five kinds of bonded areas: designated
bonded areas, bonded sheds, bonded warehouses, bonded factories, and bonded
exhibition sites. Goods may be stored in bonded areas for up to two years;
however, storage fees are high. Duties are payable only when the goods are
cleared through customs.
TAXATION
Taxes in Japan are imposed by national and local governments and can be
classified into four groups: income taxes, property taxes, consumption
taxes, and transfer of goods taxes.
(1) Taxes on Income
National Taxes: Income Tax (Individual Income Tax) and Corporate Tax
(Corporate Income Tax)
Local Taxes: Prefectural Inhabitants Tax, Enterprise Tax, and Municipal
Inhabitants Tax
(2) Taxes on Property
National Taxes: Inheritance Tax and Gift Tax
Local Taxes: Automobile Tax, Mine-lot Tax, Property Tax, Light Vehicle Tax,
Special Landholding Tax, Business Office Tax, and City Planning Tax
(3) Taxes on Consumption
National Taxes: Consumption Tax (general excise tax), Liquor Tax, Tobacco
Tax, Gasoline Tax, Liquefied Petroleum Gas Tax, Aviation Fuel Tax, Petroleum
Tax, Local Road Tax, Customs Duty, and Monopoly Profits Tax
Local Taxes: Prefectural Tobacco Tax, Golf Course Utilization Tax, Special
Local Consumption Tax, Municipal Tobacco Tax, and Bathing Tax
(4) Taxes on Transfer of Goods
National Taxes: Bourse Tax, Securities Transaction Tax, Registration and
License Tax, Motor Vehicle Tonnage Tax, Stamp Tax, Tonnage Due, Special
Tonnage Due, and Promotion of Power-Resources Development Tax
Local Taxes: Real Property Acquisition Tax, Hunter's Registration Tax,
Automobile Acquisition Tax, Hunting Tax, and Mineral Product Tax
The United States and Japan signed an Income Tax Treaty on July 9, 1972.
This agreement was designed to prevent double taxation from occurring with
respect to income taxes. The Japanese Government reduced personal and
corporate income tax rates and introduced an indirect value-added tax
(general excise tax) named the consumption tax in April 1989.
Consumption Tax: The commodity tax was replaced April 1, 1989 with a
consumption tax of 3 percent, 6 percent on autos. The consumption tax,
intended to broaden the tax base and thereby improve the Japanese
Government's ability to respond to growing claims on the national purse in
one of the world's fastest aging societies, evoked widespread popular
opposition, as it is primarily viewed by consumers as a sales tax. The
impact of the consumption tax on imports into Japan has not been severe, and
imports have continued to rise strongly since its imposition. It is levied
at the time of each resale, starting with customs clearance into Japan at
which time it is levied on the cost, insurance, and freight (c.i.f.) value
plus import tariff. Most retail sales are also subject to the 3 percent
consumption tax.
Tax Treatment of Foreign-Owned Firms: Local branches of foreign firms are
generally taxed only on income derived from within Japan, whereas domestic
Japanese corporations are taxed on their worldwide income. Calculation of
taxable income and allowable deductions, and payments of consumption tax are
otherwise the same as those for domestic companies, with national treatment
for foreign firms. The Corporation Tax Act classifies corporations as
either foreign or domestic depending on the location of the head office,
without regard to the place of incorporation. The U.S.-Japan Tax Treaty
provides for the avoidance of double taxation.
Dividends distributed by a Japanese firm are subject to a 20 percent
withholding tax. The tax treaty reduces this tax to 15 percent for U.S.
shareholders. Interest payable to a nonresident is normally subject to
withholding of 20 percent, but the tax treaty reduces this to 10 percent, as
long as the interest is not attributable to a permanent establishment in
Japan. Royalties and fees paid to a foreign licenser by a Japanese licensee
are subject to a normal withholding tax of 20 percent, reduced to 10 percent
by the tax treaty.
Rate of Corporation Tax: As of April 1, 1990, the basic rate of 37.5
percent was established for the national corporation tax. The rate is 28
percent for firms capitalized at or under 100 million yen and with a taxable
income of under 8 million yen.
Capital Gains: Capital gains from the transfer of real property in Japan
are subject to the normal corporation tax (37.5 percent). In addition,
capital gains are subject to the surtax at the rate of 20 percent with
regard to gains on transfer of land in Japan possessed for not more than
five years (30 percent surtax if less than two years). Capital gains from
the sale of securities are subject to the normal corporation tax at the rate
of 37.5 percent. A special tax-exempt provision concerning capital gains on
the sale of securities exists in Japan's tax treaty with the United States.
You should contact a U.S. business consulting or accounting firm in Japan
for specific guidance on tax issues. A list is available from the Japan
Export Information Center (JEIC) at (202) 377-2425.
THE STRUCTURAL IMPEDIMENTS INITIATIVE
The Japanese economy is undergoing marked structural change. Fast-growing
domestic demand, currently fueled by both personal consumption and capital
investment, supplanted external demand as the engine of Japanese economic
growth in 1985-90. This change has primarily been a market-driven response
to the fundamental exchange rate realignment of the last five years. Another
central factor has been the focus on deregulation of the economy,
particularly the privatization of public telecommunications and railway
companies and the simplification of product standards. Despite progress in
this area, Japan's economy remains heavily regulated, reinforcing business
practices that restrict competition and thus keep prices high. Price
controls remain on certain agricultural products, and bureaucratic obstacles
to the entry of new firms into businesses such as trucking, retail sales,
and telecommunications also have slowed the economy's structural adjustment.
To accelerate structural adjustment, on July 14, 1989, President Bush and
Prime Minister Uno launched the Structural Impediments Initiative (SII) to
identify and solve structural problems in both countries that stand as
impediments to the reduction of payments imbalances. Under this initiative,
the U.S. side identified six areas of concern in Japan's economy -- savings
and investment, land use, distribution system, pricing mechanism,
exclusionary business practices, and affiliated-company (keiretsu)
relationships. The Japanese side in turn proposed study of American
policies in seven areas that bear on U.S. competitiveness.
In the SII Joint Report, issued June 28, 1990, both sides agreed to carry
out reforms in these areas. Japan committed to spend 430 trillion yen from
1991-2000 to address social infrastructure needs, which will help correct
Japan's chronic imbalance of savings over investment and foster further
domestic-led economic growth. Vigorous implementation by Japan of the
competition-oriented domestic economic reforms, such as toughening
anti-trust enforcement, easing of limits on large stores, land tax reform,
and more corporate disclosure, should help translate Japan's growing
productivity into higher living standards and stimulate greater demand for
imports. Already, liberalized rules for large retail store openings have
led to many new store applications, including several outlets planned by one
major U.S. retailer.
FOREIGN TRADE BARRIERS
Over the past few years, the Government of Japan has removed most formal
barriers to the import of goods and services. Import licenses, which are
still technically required for all goods, are granted on a pro forma basis
with limited exceptions (fish, leather goods, and some agricultural
products). Japan's average tariff rate is one of the world's lowest, and
Japan has offered to reduce its industrial tariffs by one-third in the
Uruguay Round market access negotiations. If successful, the Uruguay Round
will further reduce trade barriers in a number of areas such as agriculture,
where an end to the ban on rice imports is sought; manufactured goods, where
the United States has proposed the mutual elimination of tariffs for major
industrial sectors; and the services sector.
In one of the most intensive periods of U.S.-Japan trade negotiations ever,
U.S. and Japanese negotiators in concluded agreements to improve sales
opportunities for foreign supercomputer manufacturers in Japan's public
sector supercomputer market, remove restrictions for purchases of foreign
commercial satellites, resolve tariff and standards issues regarding wood
products, and enhance opportunities for U.S. and foreign semiconductor
manufacturers to sell their products in Japan. In addition, the Government
of Japan agreed to liberalize the market for telecommunication products and
services, strengthen copyright protection for American music recordings, and
resolve a dispute involving amorphous metals. Also, the list of
construction projects covered by the Major Projects Agreement (MPA) was
expanded in July 1991. The revised MPA improves the procurement procedures
and has established a new complaints mechanism.
Current obstacles to selling into the Japanese market do not fit into
conventional trade barrier categories. Instead of tariffs and official
discrimination against imports, American exporters face a number of factors
which raise costs and inhibit access. These include the tangle of
government red tape, the high cost of land, an outdated and fragmented
distribution system, collusion among Japanese competitors, and insular
attitudes by both government and private business executives. As described
previously, through the SII, the Japanese Government has committed itself to
a number of steps in the areas of distribution, exclusionary business
practices, and land use which should help cut the cost of new market entry
for U.S. exporters.
U.S.-JAPAN TRADE AND INVESTMENT
The U.S.-Japan trade deficit reached an all-time high in 1987 at $59
billion, but has been slowly decreasing. The 1990 trade deficit was $41
billion, a decrease of 16.3 percent from 1989. The narrowing can be
attributed to a continual increase in U.S. exports, as well as a recent
decrease in Japanese imports into the United States. The first year in
which U.S. imports from Japan decreased was 1990. While the U.S.-Japan
trade deficit narrowed, Japan's overall trade surplus increased to $52
billion.
U.S. exports to Japan consist primarily of automatic data processing
machines and office equipment; wood, in the rough or roughly squared;
aircraft, spacecraft, and associated equipment; seafood products; and
semiconductors and other electronic components. Imports from Japan are
comprised mostly of motor cars and other motor vehicles, automatic data
processing machines and office equipment, parts and accessories of motor
vehicles, scientific optical equipment, and semiconductors and other
electronic components.
U.S. foreign direct investment in Japan reached a cumulative value of $20.9
billion in 1990. This is an increase of 13.6 percent from the 1989 total of
$18.5 billion. Foreign investment in Japan in 1989 was primarily in the
machinery, real estate, commerce/foreign trade, chemical, banking/insurance,
and services sectors. This figure is far below Japan's investments in the
United States.
The Foreign Exchange and Foreign Trade Control Law and the implementing
Cabinet Order Concerning Domestic Direct Investment, Etc. (Cabinet Order No
261, Oct. 11, 1980) do not require official permission for direct foreign
investment. Nevertheless, until recently, the prospective investor had to
give prior notification of the proposed investment to the Ministry of
Finance via the Bank of Japan, and to any other ministries with jurisdiction
over the industry. In practice, the investor was notified that the Japanese
Government has no objection within one hour following notification, if the
proposed investment was in unrestricted industries. However, as part of
SII, this prior notification requirement has been replaced by ex post facto
notification for investment in unrestricted sectors.
Japan provides foreign investors national treatment after entry with limited
exceptions notified to the Organization of Economic Cooperation and
Development (OECD). In accordance with the provisions of the OECD Code of
Liberalization of Capital Movements, Japan retains restrictions in the
following business categories to protect the national security and
interest: for national security: arms, gun powder, atomic energy, aircraft,
and space development; for maintenance of public order and protection of
safety of the general public: narcotic manufacturing, vaccine
manufacturing, and security guard services; and for protection of domestic
industries: agriculture, forestry, and fisheries; petroleum refining and
marketing; leather and leather product manufacturing; and mining. In
addition, Article VII of the U.S.-Japan Treaty of Friendship, Commerce, and
Navigation exempts the following sectors from the requirement for national
treatment of investments: broadcasting, telecommunications, electric power
generation and other public utilities, domestic rail and air transportation,
banking, shipbuilding, and industries involved in the exploitation of land
or other natural resources.
Investments in the sectors mentioned above are restricted. Prior to the
1980 revision, foreign investment in these areas was prohibited. Investment
is now allowed, but investment and ownership may be limited under the
present law. U.S. investment has taken place in these sectors, but the
criteria for defining and controlling these sectors remain unclear. The
fact that guidelines are not made public potentially inhibits further
investment. Foreign investment in the banking and securities industries is
subject to a reciprocity requirement.
The U.S. business community in Japan perceives that, in addition to the
explicit legal and regulatory restrictions on foreign direct investment,
further restrictions are implemented through "administrative guidance." In
general, business in Japan is more regulated than in the United States, with
much of the regulation taking place in private through consultations between
the involved government ministry and industry. There is no counterpart to
the U.S. Administrative Procedures Act in Japan requiring that regulatory
laws and practices be formulated in public. Administrative regulations can
impede investment, including foreign investment, in service industries such
as trucking, telecommunications, and finance.
The Japanese Government continues to publish "visions" for the future
development of promising industrial sectors and to provide some funds for
pre-competitive research in certain industrial areas. The Japanese
Government does not employ local equity requirements, export performance
requirements, or local content requirements. In addition, the Japanese
Government has not forced foreign individuals or companies to divest
themselves of investments. Japanese law allows limited foreign landholding,
and foreign investors may repatriate capital and profits readily.
The acquisition of existing Japanese companies is difficult due in part to
cross-holding of shares among allied companies, and a low percentage of
publicly traded common stock. The difficulty of acquisition of existing
companies inhibits some foreign investment. While problems remain, the
American business community perceives the Japanese Government on the whole
as welcoming foreign investment at both the national and local governmental
level.
Japanese foreign direct investment in the United States reached a cumulative
value of $83.5 billion in 1990. This is an increase of 24 percent from the
1989 total of $67.3 billion. At year-end 1988, Japanese foreign direct
investment in the United States totaled $53.4 billion -- for an increase of
26 percent from 1988 to 1989. This slowing trend is due to a variety of
factors: overall interest rates have risen substantially (although the
impact on the manufacturing sector is not as great as others) and stock
prices have substantially decreased. It has therefore become difficult for
some Japanese companies to raise the necessary investment capital.
For more information on U.S.-Japanese investment, contact the following
organizations:
U.S. Department of Commerce - Japan Export Information Center
Report: Investment Climate Statement for Japan (7/90)
(202) 377-2425
U.S. Department of Commerce - Bureau of Economic Analysis
U.S. Foreign Direct Investment Abroad (202) 523-0612
Foreign Direct Investment in the United States (202) 523-0641
U.S. Department of Commerce - Office of Trade and Investment Analysis
Investment Data (202) 377-4628
THE JAPANESE GOVERNMENT
The Japanese Government spending policy has given an indirect boost to the
competitiveness of a number of Japanese industries. In the past, the
government directed considerable public and private resources to targeted
priority areas, but has been moving away from such industrial policy
measures, partly in response to criticism by Japan's trading partners of
these export-oriented policies. The Japanese Government continues to
promote high technology cooperation among firms and plays a direct role in
organizing these efforts, using off-budget resources and small amounts of
appropriated funds to contribute to investment projects and
government/private sector efforts.
The trade agencies of the Japanese Government (the Ministry of International
Trade and Industry, the Japan External Trade Organization, and the
Manufactured Imports Promotion Organization) are under pressure from foreign
countries to implement further market opening measures. These agencies are
now cooperating with the United States in the Joint Trade Expansion Program
to increase American exports to Japan. Unlike past market-opening packages,
the Japanese Government is now backing its pledges with substantial sums of
money on a case-by-case basis for import promotion from the United States.
The Ministry of International Trade and Industry (MITI): MITI is
responsible for the formulation and implementation of the government's trade
and industrial policy. With the Ministries of Finance, Construction,
Transportation, Agriculture, and Forestry and Fisheries, as well as the
Economic Planning Agency, MITI occupies a central position in what the
Japanese call the economic bureaucracy. MITI is regarded as one of the
three most powerful and prestigious ministries of the central government
(together with the Ministry of Finance and the Ministry of Foreign Affairs).
MITI has overall responsibility for trade matters, and it funds most of the
government's export promotion programs. However, day-to-day management and
operation of these programs is the Japan External Trade Organization's
responsibility. MITI functions include both policy-making and operations.
On export-related matters, it supervises the export financing programs of
Japan's Export-Import Bank, operates several types of export insurance
programs, supports research organizations, and facilitates various types of
overseas technical and cooperation training programs.
The Japan External Trade Organization (JETRO): Although legally placed
under MITI's aegis, JETRO administers the export programs of the Japanese
Government with virtual independence. MITI subsidizes roughly 60 percent of
JETRO's total annual expenditures and, technically, has final
decision-making authority over JETRO management and programs. Originally
established to help Japanese firms export, JETRO now also assists American
companies seeking to export to Japan and promotes Japanese investment in the
United States. JETRO publishes a number of market information reports and
other pamphlets useful to U.S. exporters. The degree of assistance you are
able to receive from JETRO may vary. Minimally, you should obtain a
publication list from the organization. Other JETRO trade promotion
activities include:
Export to Japan Opportunity Database: This is a combination of two
separate databases aimed at providing small and medium-sized overseas
exporters with opportunities to do business with Japanese importers.
The Potential Importer Database identifies Japanese companies and the
merchandise they want to import. This data is freely accessible from
each of JETRO's seven U.S. offices to help a potential U.S. exporter
find a potential Japanese importer. The Potential Exporter Database
provides the names of U.S. companies interested in exporting to Japan
with full product descriptions. This database is available for use by
Japanese importers at JETRO's Local Internationalization Centers in 49
locations throughout Japan.
Japanese Tops Information System: Not to be confused with the U.S.
Department of Commerce TOP program, the JETRO TOPS (Trade Opportunity
Service) is a closed-access database system for matching potential
business partners. The JETRO TOPS system matches overseas exporters
with Japanese importers from a database of tens of thousands of
companies. Registered companies are provided with a list of potential
business contacts. To register your company, complete the application
form available at JETRO's seven U.S. offices.
Trade Fairs: Since 1985, JETRO has organized large-scale trade fairs in
Japan for foreign products and services. Exhibitors in these events
have benefited from JETRO's extensive network of contacts in Japanese
industrial and distribution circles. In addition, JETRO has recently
initiated a pilot project involving small-scale exhibitions of foreign
products, exhibitions for spot sales, and import product promotion
seminars in several Japanese cities. JETRO publishes a comprehensive
annual directory titled List of Trade Fairs in Japan. For this
publication and other trade fair information, call one of the seven U.S.
JETRO offices.
Trade Complaints: Exporters who believe they have encountered nontariff
barriers or other institutional problems related to trade should contact
the U.S. Department of Commerce. In addition, complaints may be brought
to the attention of JETRO.
When JETRO deems it appropriate, trade complaints will be forwarded to the
Office of Trade and Investment Ombudsman (OTO), which was established by the
Japanese Government for the purpose of settling trade grievances. Complete
information about the OTO is available at all JETRO offices.
JETRO offices in the United States are located at:
JETRO, New York JETRO, Chicago
44th Floor, McGraw-Hill Building 401 North Michigan Avenue
1221 Avenue of the Americas Suite 660
New York, NY 10020 Chicago, IL 60611
Phone: (212) 997-0400 Phone: (312) 527-9000
JETRO, Houston JETRO, Denver
1221 McKinney 1200 17th Street
One Houston Center, Suite 2360 Suite 1110
Houston, TX 77010 Denver, CO 80202
Phone: (713) 759-9595 Phone: (303) 629-0404
JETRO, Los Angeles JETRO, San Francisco
725 Figueroa Street Suite 501
Suite 1890 Qantas Building
Los Angeles, CA 90017 360 Post Street
Phone: (213) 624-8855 San Francisco, CA 94108
Phone: (415) 392-1333
JETRO, Atlanta
245 Peachtree Center Avenue
Suite 2102
Marquis One Tower
Atlanta, GA 30303
Phone: (404) 681-0600
The Manufactured Imports Promotion Organization (MIPRO): MIPRO is a
nonprofit organization established in 1978 by the joint efforts of the
Japanese Government and the private sector to promote the imports of foreign
manufactured products by hosting various trade exhibitions and providing a
wide range of market information. MIPRO's activities are broadly classified
into the following three categories: (1) holding imported product trade
exhibitions for buyers and the general public, (2) disseminating information
regarding imported products and the Japanese market, and (3) promoting sales
of foreign products to Japanese consumers to enhance their appreciation of
the quality of imported goods. MIPRO operates under the aegis of JETRO and
maintains an office in Washington, DC at (202) 659-3729.
JAPAN IMPORT PROMOTION MEASURES
In January 1990, the Japanese Government announced a comprehensive
three-year plan to increase Japanese imports. The import promotion package
includes tax incentives for Japanese importers, elimination of tariffs on
approximately 1,004 manufactured products, low-interest loans for import
promotion activities and foreign direct investment in Japan, and a $100
million grassroots import promotion program.
Japanese manufacturers who increase their duty-free manufactured imports of
capital, intermediate, and durable goods in Standard Industrial Trade
Classification sections 5-8 by a minimum of 10 percent will be eligible for
a 5 percent tax credit of the value of the increase in imports.
Alternately, manufacturers may choose a maximum of 20 percent accelerated
depreciation for imported machinery. The Japanese Ministry of International
Trade and Industry estimates that the incentives will increase manufactured
imports by $3 billion in the Japanese fiscal year 1990.
A number of Japanese financial institutions have expanded eligibility to
foreign companies and increased low-interest loan quotas for import
promotion activities. Qualifying U.S. firms are eligible for manufactured
export financing by the Export-Import Bank of Japan. Also, the Japan
Development Bank will offer low-interest loans for foreign direct investment
in Japan by foreign investors.
The Japan External Trade Organization (JETRO) intends to increase the number
of trade and foreign buyer missions traveling to and from Japan. Many trade
mission participants will be recruited by local JETRO offices. In addition,
Japanese export consultants have been sent by JETRO to the United States for
two years to conduct seminars on exporting to Japan and provide individual
business counseling.
U.S. DEPARTMENT OF COMMERCE JAPAN EXPORT PROMOTION INITIATIVE
A true test of success for any internationally oriented business is entry
into the Japanese market, one of the most profitable, yet difficult,
markets. Ongoing efforts of U.S. trade negotiators, incremental structural
adjustments within the Japanese economy, and more recently, a significant
commitment of resources by the Japanese Government to promote imports have
combined to create an increasingly favorable commercial environment for U.S.
business. To take full advantage of export opportunities resulting from
this process, the U.S. Department of Commerce has developed an export
promotion program designed specifically to assist U.S. firms in entering the
Japanese market.
The U.S. Department of Commerce Japan Export Promotion Program has four main
elements:
(1) The Department identifies Japanese domestic infrastructure and Official
Development Assistance (ODA) projects and alerts the U.S. business
community of potential commercial opportunities. The program emphasis
is on projects which involve technologies where U.S. firms enjoy a
competitive advantage.
(2) Successful penetration of the Japanese market requires long-term
planning and dedication of significant resources to adapt to the special
features of the Japanese market. Recognizing this, the Japan Corporate
Program (JCP) has been designed to assist U.S. firms enter and/or
compete effectively in the Japanese market. On November 29, 1990, the
Commerce Department announced the 20 companies selected to participate
in the JCP. As part of a five-year commitment to the program, the
companies will arrange
four visits a year to Japan, including two by their chief executives;
publish their product literature in Japanese; participate in at least one
trade promotion event in Japan each year; and modify products as needed to
enhance sales in Japan. The Commerce Department will work closely with
these firms over the next five years, providing them with market data,
arranging introductory meetings with prospective Japanese buyers, and
recommending market development strategies. This kind of assistance is
available to U.S. firms outside of the JCP through services of the U.S.
Department of Commerce's Japan Export Information Center (JEIC) and U.S. and
Foreign Commercial Service. The Commerce Department will incorporate the
knowledge gained from the JCP into counseling services for U.S. business.
Ultimately, the JCP is intended to foster a perception in Japan that U.S.
firms can compete and to correct the U.S. business community's perception
about the limited prospects for entering the Japanese market.
(3) The Commerce Department has improved its programs to help U.S. firms
find representatives, secure market research, and participate in trade
promotion events focused on the Japanese market. In addition, the JEIC
was created to extend business counseling and to provide current and
accurate information on exporting to Japan.
(4) The U.S.-Japan Joint Trade Expansion Program, which involves data and
information exchange, market research, trade events, and trade
facilitation services, was renewed for another year in April 1991.
U.S. DEPARTMENT OF COMMERCE SPECIAL INFORMATION PRODUCTS AND BUSINESS
FACILITATION SERVICES FOR JAPAN
The following are U.S. Department of Commerce special information products
and business facilitation services that are designed to help your firm
export to Japan:
Japan Market Information Reports (JMIRs): The JMIR's are aimed at firms and
individuals that are new to Japan and need general background information on
the business climate and services available from the private sector in
Japan. The three JMIR's are titled Directory of Business Support
Organizations in Japan, Establishing a Business in Japan, and
English-Language Business Publications in Japan. To obtain these reports,
contact the American Embassy in Tokyo at:
Japanese Market Section, EIC
Foreign Commercial Service
U.S. Embassy, Tokyo
Unit 45004, Box 271
APO AP 96337-0001
Industry Subsector Analyses (ISAs): ISAs are short introductions to
selected Japanese markets -- overall assessment, competitive situation,
market access (standards and regulations),
trade-promotion opportunities, trade publications, and statistics. A list
of ISAs for Japan is available from the Japan Export Information Center
(202-377-2425). To obtain the reports, contact your local U.S. Department
of Commerce district office.
Country Marketing Plan (CMP): The annual CMP provides information on the
general commercial and economic environment, policy issues, trade
initiatives, and barriers to U.S. exports. Contact your local district
office to obtain the CMP for Japan.
Business Facilitation: The U.S. and Foreign Commercial Service/Japan
(US&FCS/Japan) offers individualized consultation services designed to help
a firm enter the Japanese market. US&FCS/Japan can also make appointments
with associations, consultants, government agencies, multipliers, or names
supplied by the U.S. firm or source and photocopy pertinent information for
the U.S. firm. US&FCS posts in Japan are located at:
U.S. Embassy, Tokyo U.S. Consulate, Fukuoka
1-10-5 Akasaka 5-26 Ohori 2-chome
Minato-ku Chuo-ku
Tokyo, Japan 107 Fukuoka, Japan 810
Phone: 011-81-33-224-5060 Phone: 011-81-92-751-9331
Fax: 011-81-33-589-4235 Fax: 011-81-92-713-9222
U.S. Consulate, Osaka-Kobe U.S. Consulate, Sapporo
11-15, Nishitenma 2-chome Kita 1-Jo Nishi 28-chome
Kita-ku Chuo-ku
Osaka, Japan 530 Sapporo, Japan 064
Phone: 011-81-6-315-5900 Phone: 011-81-11-641-1115
Fax: 011-81-6-361-5978 Fax: 011-81-11-641-0911
U.S. Consulate, Nagoya
10-19 Sakae 2-chome
Naka-ku
Nagoya, Japan 460
Phone: 011-81-52-203-4011
Fax: 011-81-52-201-4612
From the United States, the mailing addresses of the U.S. Embassy in Tokyo
and the U.S. Consulate in Osaka are:
Foreign Commercial Service Foreign Commercial Service
U.S. Embassy U.S. Consulate General,
Unit 45004, Box 204 Osaka-Kobe
APO AP 96337-0001 Unit 45004, Box 239
APO AP 96337-0002
The U.S. Trade Center: Located in Ikebukuro's Sunshine City complex, the
U.S. Embassy's U.S. Trade Center is an ideal site for single or
multi-company exhibitions, seminars, technical-product demonstrations,
conferences, receptions, and other promotional events. The Trade Center is
available for use by your company or by your representative in Japan. Your
company may wish to take advantage of these facilities which offer an
impressive American ambience. To identify possible upcoming events or to
schedule one yourself, contact your local district office or the Trade
Center at:
U.S. Trade Center MAILING ADDRESS:
7th Floor, World Import Mart U.S. Trade Center
1-3 Higashi Ikebukuro 3-chome Unit 45004, Box 229
Toshima-ku, Tokyo APO AP 96337-0001
Phone: 011-81-33-987-2441
Fax: 011-81-33-987-2447
WHERE TO RECEIVE EXPORT COUNSELING
Trade Information Center (TIC): The U.S. Government interagency Trade
Promotion Coordinating Committee has established a comprehensive, one-stop
information center for U.S. companies seeking information on Federal
programs and activities that support U.S. exports, including information on
overseas markets and industry trends. The center provides detailed
information on the resources available through the publication Export
Programs: A Business Directory of U.S. Government Resources. Also provided
is a computerized calendar of U.S. Government-sponsored domestic and
overseas trade events. For more information, contact the TIC at
1-800-USA-TRADE.
U.S. Department of Commerce/International Trade Administration (ITA): ITA
offers assistance and information to help U.S. exporters. ITA units include
country (International Economic Policy -- IEP) and industry (Trade
Development -- TD) experts and domestic and overseas commercial offices
(U.S. and Foreign Commercial Service -- US&FCS), each promoting products and
offering services and programs for the U.S. exporting community.
The Japan Export Information Center (JEIC): The Office of Japan is the
country-specific (IEP) expert on Japan in ITA. The Office of Japan performs
two separate and distinct functions: trade policy and trade promotion. The
former involves the development and implementation of bilateral and
multilateral trade policy and commercial strategies. The latter function is
performed by the recently established JEIC. The JEIC offers business
counseling and provides current and accurate information on exporting to
Japan. The JEIC provides information on doing business in Japan, market
entry alternatives, market information and research, product standards and
testing requirements, tariffs, and nontariff barriers. The staff also
maintains a commercial library and is available to participate in private-
and government-sponsored seminars on various aspects of doing business in
Japan. Contact the JEIC at (202) 377-2425.
Trade Development (TD): TD industry specialists work with manufacturing and
service industry representatives and associations to identify trade
opportunities and obstacles by product or service, industry sector, and
market. They also develop export marketing plans and programs. To assist
U.S. business in its export effort, industry experts conduct executive trade
missions, trade fairs, marketing seminars, and business counseling. Seven
major industry sector offices offer export promotion services: Aerospace,
Automotive and Consumer Goods, Basic Industries, Capital Goods and
International Construction, Science and Electronics, Services, and
Textiles and Apparel. A cross-sectoral unit, Trade Information and
Analysis, provides statistical data and analyses useful in export
promotion. To identify an industry specialist, call (202) 377-1461 or
contact the Japan Export Information Center at (202) 377-2425.
U.S. and Foreign Commercial Service (US&FCS): Established to help U.S. firms
compete more effectively in the global marketplace, the US&FCS has a network
of trade specialists in 68 U.S. cities (district offices) and 67 countries
worldwide. US&FCS offices provide information on foreign markets;
agent/distributor location services; trade leads; financing aid; and
counseling on business opportunities, barriers, and prospects abroad.
District office trade specialists can provide the business community with
local export counseling and a variety of export programs and services,
including the Export Qualifier Program. In this program, specialists help
firms determine their readiness to export through a computerized program.
Specific recommendations are proposed to help strengthen and enhance a
company's exporting ability. For the telephone number of your local
district office, contact the Japan Export Information Center at (202)
377-2425 or call (202) 377-4767.
Office of Export Trading Company Affairs: This office has the Federal role
in promoting the formation and use of export trading companies and export
management companies, and offers information and counseling to businesses
and trade associations regarding the U.S. export intermediary industry. The
office also administers the Export Trade Certificate of Review program,
which provides limited antitrust protection to U.S. firms for joint export
activities that can lower expenses and increase profits. For more
information, call (202) 377-5131.
U.S. Department of Commerce/Bureau of Export Administration (BXA): BXA is
responsible for control of exports for reasons of national security, foreign
policy, and short supply. Licenses on controlled exports are issued and
seminars on U.S. export regulations are held domestically and overseas. For
information, call (202) 377-4811.
U.S. Department of Commerce/National Oceanic and Atmospheric Administration
(NOAA)/National Marine Fisheries Service (NMFS): NMFS specialists work with
fishing industry representatives and organizations to facilitate access to
foreign markets. In cooperation with US&FCS, NMFS assists exporters seeking
to find and explore new opportunities for export of fish and fish products,
especially to the Japanese and European markets. It also provides
inspection services for fishery exports and issues U.S. Government
certification. Contact the Office of Trade and Industry Services at (301)
427-2379 and Export Inspection Services at (301) 427-2355.
U.S. Department of Agriculture/U.S. Trade Assistance and Planning Office
(TAPO): TAPO is a single contact point within the Foreign Agricultural
Service for agricultural exporters seeking foreign market information. The
office also counsels firms that believe they have been injured by unfair
trade practices. Contact TAPO at (703) 305-2771.
Small Business Administration/Export Legal Assistance Network (ELAN): ELAN
is a nationwide group of attorneys with experience in international trade
who provide free initial consultations to small businesses on export-related
matters. Contact ELAN at (202) 778-3080.
Small Business Administration/Small Business Institutes (SBI): SBIs provide
international trade counseling and management assistance to eligible small
businesses. Contact the Office of Business Development at (202) 205-7414.
Export-Import Bank of the United States/Services for Small Businesses:
Eximbank offers briefing programs which are available to the small business
community, including regional seminars, group briefings, and individual
discussions held both within the bank and around the country. Eximbank
offers a special toll-free hotline to provide information on the
availability and use of export credit insurance, guarantees, and direct and
intermediary loans extended to finance the sale of U.S. goods and services
abroad. Contact the hotline at 1-800-424-5201.
Export-Import Bank of the United States/City-State Program: Eximbank works
with state and local government agencies to offer export counseling and
financial assistance to the businesses in their jurisdictions. Cooperative
programs currently operate in three cities (Columbus, Los Angeles, and
Tucson) and eight states (California, Maryland, Massachusetts, Nevada,
Michigan, Texas, Utah, and Washington) and the Port Authority of New
York/New Jersey. New programs are being established in North Carolina,
Oklahoma, and Pennsylvania. For more information, contact (202) 566-4490.
Overseas Private Investment Corporation (OPIC)/Investor Services: Investor
services is an OPIC initiative designed to assist smaller U.S. firms with
their overseas investment planning and implementation needs. Fee-based
services provide counseling to American firms on business plan development,
project structuring, joint venture partner identification, and location of
project financing services. Contact Investor Services at (202) 457-7091.
WHERE TO GET MARKET INFORMATION AND TRADE LEADS
U.S. Department of Commerce/National Trade Data Bank (NTDB): The NTDB is a
comprehensive source of export promotion and international trade data
collected by 15 U.S. Government agencies. Updated each month and released
on one CD-ROM, the NTDB enables a user with an IBM-compatible personal
computer equipped with a CD-ROM reader to access over 100,000 trade-related
documents. The NTDB contains the latest Bureau of the Census data on U.S.
imports and exports by commodity and country; the complete CIA World
Factbook; current market research reports compiled by the U.S. and Foreign
Commercial Service; the complete Foreign Traders Index, which contains over
45,000 names and addresses of individuals and firms abroad interested in
importing U.S. products; and other significant trade data. The NTDB is
available at over 600 federal depository libraries nationwide and can be
purchased for $35 per single disc or $360 for a 12-month subscription.
Contact your local U.S. Department of Commerce district office or call (202)
377-1986 for ordering and other information.
U.S. Department of Commerce/The Economic Bulletin Board (EBB): The EBB, a
personal computer-based electronic bulletin board, is your on-line source
for trade leads as well as for the latest statistical releases from the
Bureau of the Census, the Bureau of Economic Analysis, the Bureau of Labor
Statistics, the Federal Reserve Board, and other federal agencies.
Subscribers to the EBB pay an annual registration fee of $35, which allows
two hours of free access to the system. For access information, contact EBB
at (202) 377-1986.
U.S. Department of Commerce/Trade Opportunities Program (TOP): TOP provides
companies with current sales leads from international firms seeking to buy
or represent U.S. products or services. TOP leads are printed daily in
leading commercial newspapers, such as the Journal of Commerce and are also
distributed electronically via the Economic Bulletin Board. The fee varies.
Contact: Your nearest U.S. Department of Commerce district office or (202)
377-4767.
U.S. Department of Commerce/World Traders Data Report (WTDR): A method for
checking the reputation, reliability, and financial status of a prospective
trading partner. For $100, an exporter can obtain this information, along
with a recommendation from commercial officers at the U.S. Embassy as to the
suitability of the company as a trading partner. Contact your local U.S.
Department of Commerce district office or call (202) 377-4767.
U.S. Department of Commerce/Business America (BA): The principal Commerce
Department publication for presenting domestic and international business
news. Each biweekly issue includes a "how to" article for new exporters; a
discussion of U.S. trade policy; news of government actions that may affect
trade; and a calendar of upcoming trade shows, exhibitions, fairs, and
seminars. An annual subscription is $49. For information about BA, contact
ITA's Office of Public Affairs at (202) 377-3251, or for ordering a
subscription, contact the U.S. Government Printing Office at (202) 783-3238.
U.S. Department of Commerce/Commercial News USA (CNUSA): A monthly magazine
published by the U.S. and Foreign Commercial Service to promote U.S.
products and services to overseas markets, which is disseminated through 240
U.S. embassies and consular posts around the world. Selected portions are
reprinted in newsletters that are tailored in content and language to the
individual country and distributed to potential buyers, agents, American
chambers of commerce abroad, and other multipliers. U.S. firms can have
their products or services highlighted for a small fee. Contact your local
U.S. Department of Commerce district office or call (202) 377-4918.
U.S. Department of Commerce/Bureau of the Census/Center for International
Research (CIR): CIR compiles and maintains up-to-date global demographic
and social information for all countries in its International Data Base
(IDB), which is accessible to U.S. companies seeking to identify potential
markets overseas. The information on the IDB can be purchased for $175.
Contact the Systems Analysis and Programming Staff at (301) 763-4811.
U.S. Department of Agriculture/Economic Research Service (ERS): The ERS
staff provides economic data, models, and research information about
agricultural economies and policies of foreign countries and bilateral
agricultural trade and development relations. The ERS maintains files on
the production and marketing of major commodities, pricing data, use
development and conservation of natural resources, and overseas performance
of the U.S. agricultural industry. It also publishes regional agricultural
and trade reports, commodity outlook circulars, and a variety of research
publications on country specific issues. Contact Agriculture and Trade
Analysis Division at (202) 219-0700.
U.S. Department of Agriculture of Agriculture/Trade and Marketing
Information Centers: These centers, part of the National Agriculture
Library, help locate relevant material from their large collection on trade
and marketing, and provide copies of research and data from their AGRICOLA
database. Contact the Information Center Branch at (301) 344-3704.
U.S. Department of Agriculture/Country Market Profiles: These profiles are
country-specific 2-4 page descriptions of 40 overseas markets for high value
agricultural products. They provide a market overview, market trends,
information on the U.S. market position, the competition, and general
labeling and licensing requirements. Contact the FAS Information Division
at (202) 720- 7937.
U.S. Department of Agriculture/AGExport Connections: The AgExport Action
Kit provides information which can help put U.S. exporters in touch quickly
and directly with foreign importers of food and agricultural products.
Contact AgExport Connections Staff at (202) 720-7103.
U.S. Department of Agriculture/Computerized Information Delivery Service
(CIDS): CIDS provides instant access to USDA reports and news releases,
making time-sensitive agricultural information available to any location
within seconds of release. Among the information available, for a fee,
through CIDS are trade leads, market reports, economic outlooks, and certain
statistics. For more information, contact (202) 720-5505.
U.S. Department of Labor/Foreign Labor Trends: These are a series of
reports, issued annually, that describe and analyze labor trends in more
than 70 foreign countries. The reports, which are prepared by the U.S.
Embassy in each country, cover labor-management relations, trade unions,
employment and unemployment, wages and working conditions, labor and
government, international labor activities, and other significant
developments. A list of key labor indicators is also included. Contact the
Office of Foreign Relations at (202) 523-6257.
U.S. Department of Energy/Coal and Technology Export Program: This program
promotes the export of U.S. clean coal products and services by acting as an
information source on coal and coal technologies. Contact the Office of
Fossil Energy at (202) 586-7297.
Small Business Administration/Export Information System (EIS): EIS data
reports provide specific product information on the top 25 world markets and
market growth trends for the past five years. Contact the Office of
International Trade at (202) 205-7264.
GUIDANCE FOR BUSINESS TRAVELERS
Documents Required: A valid U.S. passport is necessary to enter and travel
in Japan, and by law foreigners are required to carry their passports at all
times. A visa is not needed for visits up to 90 days (with a round-trip air
ticket) unless you plan to establish a business or work for a Japanese firm,
in which case visa applications are available at the Japanese consulate
nearest your U.S. residence. Immunization and health certificates are not
required upon entrance. If you will be staying longer than 90 days, you
must obtain an Alien Registration Card, available free of charge from the
municipal office of the city or ward where you are temporarily residing in
Japan.
Arrival Procedures: Upon arriving in Japan, your passage through both
immigration and customs is usually automatic as long as your passport (and
air ticket if arriving without a visa) is in order. An oral declaration of
personal effects is all that is required unless you arrive by ship, have
unaccompanied baggage, or bring articles exceeding the duty-free allowance.
If you expect unaccompanied luggage to arrive after you, in order to be
exempt from paying duty later, a declaration form should be filled out when
you clear customs. The duty-free allowance is roughly $1,400 (200,000
yen). You are allowed to carry up to two cartons of cigarettes, 2 ounces of
perfume, and three 750 ml bottles of hard liquor into the country. Japan
has very stringent regulations on admitting plants, vegetables, and other
agricultural produce into the country. Since customs restrictions vary
depending on country of origin, it is advisable to check before your
departure with the Japanese Embassy or your nearest Japanese consulate. A
few luggage carts are available at the airport, but elsewhere you must carry
your own baggage. A few porters are available, but at principal rail
stations only. Light packing is advised. You should exchange U.S. dollars
for yen before leaving the airport, especially if you are arriving at night
or on a Sunday. There is a currency exchange counter inside the customs
area of Narita Airport (Tokyo).
Business Hours: Businesses usually operate Monday through Friday from 9:00
AM until 5:00 PM. Some may be open later on weekdays, and many are open
until noon on Saturday. Banking hours are from 9:00 AM to 3:00 PM Monday
through Friday. Most stores are open from 10:00 AM to 8:00 PM, except
department stores which close between 6:00 PM and 7:00 PM. Restaurants are
open from 11:30 AM to 10:00 PM. Family restaurants as well as coffee shops
start serving at 10:00 AM or earlier. Bars and nightclubs open at around
5:00 PM. Public transportation is not available after midnight and taxis
add an additional charge from 11:00 PM to 5:00 AM.
Holidays: In addition to the holidays listed below, Japanese firms and
government offices observe year-end and New Years Holidays,
December 29th through January 5th; and the Bon Festival, when many Japanese
return to their hometown to honor the deceased, August 13th through the 16th:
January 1 New Year's Day
January 15 Adult's Day
February 11 National Foundation Day
March 21 Vernal Equinox Day
April 29 Greenery Day
May 3 Constitution Memorial Day
May 5 Children's Day
September 15 Respect-for-the-Aged
September 23 Autumnal Equinox Day
October 10 Health-Sports Day
November 3 Culture Day
November 23 Labor Thanksgiving Day
December 23 Emperor's Birthday
Time: Japan occupies only one time zone. Japan Standard Time, observed all
year, is 14 hours ahead of U.S. Eastern Standard Time (13 hours during
daylight savings time in the United States).
Language: The average Japanese person does not speak English with any
fluency. Although some staff members at major hotels, department stores,
and restaurants speak English, it should not be expected outside of these
situations. While in the business environment English is becoming more
widely used, you should hire an interpreter for important business
meetings. The Japan Export Information Center or the Commercial Section of
the U.S. Embassy can recommend a specialist agency to fit your needs. The
fee for an interpreter varies from about $230 to $615 per day (30,000 yen to
80,000 yen) depending on ability. You should carefully screen applicants as
there is no guarantee of quality.
Climate: Japan is characterized by a change of seasons. Summers are muggy
and hot, with a rainy season that begins in June and continues until
mid-July. The rainy season is followed by a period of clearer, hotter
weather lasting almost without interruption until the stormy typhoon season
in late August and September. In general, fall and winter are much drier
than the spring and summer and little snow falls on the Pacific Ocean side
of Japan's main island of Honshu. Spring is beautiful in Japan with cherry
and plum blossoms in full bloom. Generally, the weather and climate in
Tokyo is similar to that of Washington, D.C.
Money: There are no restrictions on the amount of money brought into or
taken out of Japan. Coin denominations are 1, 5, 10, 50, 100, and 500 yen
and paper denominations are 1000, 5000, and 10,000 yen. Most consumer
transactions in Japan are in the form of cash. Travelers checks can be
exchanged at major department stores, hotels, banks, and retail
establishments. Credit cards are accepted at hotels, department stores, and
many shops and restaurants. U.S. credit cards can also be used in
cash-dispensing machines in some banks and department stores to obtain yen.
It is safe to carry cash in Japan since there is a very low incidence of
street crime. U.S. personal checks are not practical to use on short visits.
Telephones: Public telephones are available everywhere for domestic calls.
Local calls are 10 yen per three minutes. International calls can be made
inexpensively from designated public telephones available in major
commercial areas. Also available and convenient are prepaid telephone cards
at vending machines for use in public telephones. U.S. telephone operators
can be reached for collect and credit card calls.
Hotels: World-class Western-style hotels are located in all major cities
and many smaller cities. Hotels are more expensive in Japan but offer
excellent service and many amenities. English is universally used in these
hotels. Business persons contemplating a trip to Japan should make early
reservations since space is limited. Smaller, less expensive "business
hotels" are also an alternative. There is a tourist information office and a
hotel reservation desk at Narita Airport (Tokyo).
Transportation: Japan maintains a clean, sophisticated, and efficient
transit system. You can reach almost any location by using buses, subways,
and taxis. The national and private railways are prompt and convenient, and
the Tokyo routes can be navigated with a map and a little effort. Buses are
more difficult because the routes are more complicated and the signs mostly
in Japanese. If at all possible, it is best to avoid traveling at rush hour
in Tokyo, as all modes of transportation are very crowded.
Tokyo train and subway systems are very convenient and relatively easy to
understand; in fact, train lines are color coded. Commuter trains are well
connected with long distance trains. Maps of the system are free of charge
and are available at subway and train stations. Fares correspond to
distance traveled, and most local fares can be purchased at vending
machines. Wall maps located in the station identify destinations and
related fares. If you are unsure of a fare, it is best to get the lowest
fare and upon reaching your destination the ticket taker will inform you of
the amount remaining. Subway and commuter train service usually ends at
midnight.
Taxicabs are expensive but plentiful, and available around the clock. There
is an extra fee added to your fare between 11:00 PM and 5:00 AM. Taxicab
drivers rarely speak English. You may wish to have a clerk at your hotel
write your destination on a slip of paper to show the driver. In any case
if your destination is not well known you should carry a map with the
location marked in Japanese. Do not open or close the passenger door of the
cab -- it is controlled by a lever operated by the driver. Taxi drivers do
not receive tips.
Restaurants: Water is perfectly safe to drink throughout Japan. Japanese
hold cleanliness in high regard and even inexpensive coffee shops and
restaurants are extremely well kept. A 10 percent tax is applied to bills
over 2,000 yen, and a service fee of 10-15 percent is included in all hotel,
nightclub, and restaurant bills. In Japan tipping is not customary.
There are many different types of restaurants in Japan, including hotel
restaurants, fast-food, Western-style restaurants, Chinese, and of course
specialized traditional Japanese restaurants. Hotel restaurants are usually
very expensive. There are many chain and independently owned family
restaurants in Japan where food is good and inexpensive. The lunch meal is
the best value in eating out in Japan.
Upon entering a traditional Japanese restaurant or a Japanese home, shoes
must be removed at the entrance and are replaced by slippers. These should
be worn as long as the floor is plain wood; in the tatami (straw mat) area,
slippers come off and you walk in stocking feet. When eating in Japanese
restaurants, an attempt to use chopsticks will bring attention, approval,
and even appreciation from waitresses and hosts. When offered sake, beer,
or other drinks at a dinner party or in a club, the glass or cup should be
lifted an inch or two from the table. The custom is that you fill your
partner's glass or cup, not your own.
Emergencies: Throughout Japan, if police assistance is needed, dial 110.
The police officer who answers the phone probably will not speak English;
however, he or she will transfer you to someone who does. In the event of
an accident or fire, dial 119 from anywhere in Japan. Pay phones usually
have a red button which is a direct line to emergency assistance.
Electrical Power: Japanese electrical power is 100 volts alternating
current. The frequency is 50 Hz in Tokyo, while in Nagoya and west of
Nagoya (Kyoto and Osaka) the frequency is 60 Hz.
Measures: The metric system is used in Japan, and temperature readings are
measured in centigrade.
RELEVANT PUBLICATIONS
There are many English-language publications on Japan and Japanese business
practices. The following is a bibliography of the publications that proved
to be most useful in compiling this report and which are available through
the contacts given:
(1) Government Printing Office: The following publications are available
from the U.S. Government Printing Office. To place an order, write or phone:
Superintendent of Documents
Government Printing Office
Washington, D.C. 20402-9325
Phone: (202) 783-3238
A Basic Guide to Exporting. U.S. Department of Commerce, 1986. Includes
information on exporting strategy, business operations, and the mechanics of
exporting. (Stock Number 003-009-00487-0)
Japan: A Country Study (Area Handbook Series). Department of the Defense,
1982. An authoritative publication covering the history, culture,
character, and structure of the economy, the political system, foreign
relations, and national security.
National Negotiating Styles. Foreign Service Institute, U.S. Department of
State, 1987. A handbook containing valuable tips on negotiating with the
Japanese and other foreign nationalities.
1991 National Trade Estimate Report on Foreign Trade Barriers. Office of the
United States Trade Representative, 1991. A comprehensive,
country-by-country review outlining the basic trade issues confronting U.S.
companies doing business overseas.
(2) U.S. Department of Commerce District Offices: The following publication
is available through your local U.S. Department of Commerce district office:
Country Marketing Plan (CMP), 1991. (Annual) Significant country data, best
prospects and industry analysis, outline of the commercial and financial
environment (including regional outlook), and barriers to trade. List of
available market research and upcoming trade events also included.
(3) American Chamber of Commerce in Japan: Selected publications available
through the American Chamber of Commerce in Japan are listed below. Order
forms and publications are available from:
The American Chamber of Commerce in Japan
Fukide Bldg. No. 2, 7th Floor
4-1-21 Toranomon
Minato-ku, Tokyo 105, Japan
Phone: 011-81-3-3433-5381
Fax: 011-81-3-3436-1446
American Chamber of Commerce in Japan (ACCJ) Directory. ACCJ, 1991
(annual). A complete listing of more than 600 U.S. corporations and 2,000
individuals that are members and associates.
ACCJ Journal. A monthly magazine which contains timely articles about doing
business in Japan. Concentrates on U.S. business activities and marketing
principles which have been successful in Japan.
The Current Environment for Trade and Investment in Japan. ACCJ, 1991. A
major study that evaluates the current climate for trade and investment in
Japan and analyzes the key factors for success. Includes more than 30
detailed industry sector reports.
Employment Practices of American Companies in Japan. ACCJ, 1991. A
thorough analysis of how American companies in Japan treat their employees,
based on a survey of the employment practices of 204 ACCJ member firms.
Covers employee relations, development and training, recruitment, personnel
policies, and local trends.
Exporting to Japan. ACCJ, 1989. An excellent publication that discusses
"rookie" mistakes in exporting to Japan that cost time and money. Gives the
new exporter an immediate opportunity to benefit from the experience of
others, while the veteran gets some helpful new tips as well.
Finding a Home in Tokyo. ACCJ, 1991. A practical guide for the newcomer
through the bewildering world of Tokyo real estate.
Living in Japan. ACCJ, 1987. A guide for those who anticipate an
assignment to Japan or have been recently relocated there.
United States-Japan Trade, White Paper. ACCJ, 1990. A sector-by-sector
look at the current status of bilateral trade issues effecting U.S.
companies in Japan. Industry background, current status, and
recommendations are given and the U.S. and Japanese Government actions are
highlighted.
(4) OCS America, Inc. Publications: The following publications are
available through OCS America (a worldwide publications distributor).
OCS America, Inc.
Rm. 1186 Nat'l Press Bldg.
14th Street & F Street, N.W.
Washington, D.C. 20045
Phone: (202) 347-4233
1991-92 Directory: Japanese-Affiliated Companies in the U.S.A. and Canada.
Japan External Trade Organization (JETRO). A listing of major Japanese
firms in the United States and Canada by state and product category.
The Japanese Market: A Compendium of Information for the Prospective
Exporter -- 1991. Japan External Trade Organization. Contains information
on the Japanese market, consumers, business practices, distribution system,
labeling and marking, and import procedures.
Setting Up a Business in Japan: A Manual. Japan External Trade
Organization, 1991. How-to guide to establishing an organization in Japan.
STEP: The Business Person's Guide to the Japanese Market. Japan External
Trade Organization, 4 vol., 1990. Collection of four volumes which include
successful market entry strategies, an introduction to Japan and sources of
information, a directory of Japanese importers, and products subject to
tariff elimination and tax incentive programs.
Trade Procedure Guide for Export to Japan. Japan External Trade
Organization, 1990. Answers questions regarding Japanese import system and
procedures, import procedures for importing major items, standards, and how
to sell products in the Japanese market.
(5) National Technical Information Service (NTIS): NTIS, in cooperation
with the U.S. Department of Commerce Japanese Technical Literature Program,
offers a new Japanese directories series. Order forms and publications are
available through:
U.S. Department of Commerce
National Technical Information Service
Springfield, VA 22161
Phone: (703) 487-4650
Fax: (703) 321-8547
Directory of Japanese Databases -- 1990. NTIS, 1989. Provides a
description of 43 Japanese databases that are accessible from the United
States.
Directory of Japanese Technical Reports 1990-1991. NTIS. Contains complete
bibliographic citations (including abstracts) of Japanese reports that
entered the NTIS collection during 1990-91.
Directory of Japanese Technical Resources in the United States -- 1991.
NTIS, 1990. Contains an extensive listing of over 250 commercial services,
government agencies, and libraries that acquire, translate, or disseminate
Japanese technical information.
(6) Miscellaneous: The following sources are also useful references:
Access Nippon: How to Succeed in Japan. Access Nippon, Inc., 1991
(annual). Includes information on the Japanese economy, business practices,
getting along in Japan, specific Japanese industries, and corporate
profiles. Contact: Access Nippon Inc., Yamaguchi Bldg., 2-8-5 Uchikanda,
Chiyoda-ku Tokyo, 101 Japan. Fax: 011-81-3-3258-1487
Japan Company Handbook. Toyo Keizai, Inc. (quarterly). Provides a look at
publicly traded Japanese companies. Company description, industry outlook,
key financial and corporate data, and stock performance is given. Organized
alphabetically by industry for fast reference. Published in two sections.
Available through Toyo Keizai America Inc. Phone: (212) 949-6737 Fax:
(212) 949-6648
Japan Economic Almanac. Nihon Keizai Shimbun, Inc., 1991 (annual).
Overview of Japanese industry sectors, including a review of the year,
information on the Japanese economy, and key trends. Lists key government
agencies and officials, and business organizations and associations.
Contact: Nihon Keizai Shimbun, Inc., 1221 Avenue of Americas, Suite 1802,
New York, NY, 10020
JEI Reports. Japan Economic Institute (weekly). Cover various trade and
economic issues and focus on one topic in-depth each week. Contact: Japan
Economic Institute at (202) 296-5633.
Soft Landing in Japan: A Market Entry Handbook for U.S. Software Companies.
American Electronics Association (AEA), 1990. A how-to source book for
establishing a presence in the Japanese software market. Guide can be
obtained by contacting AEA Infonet at (408) 987-4200.
ARE YOU READY TO EXPORT TO JAPAN?
Before your first sale, you should be prepared for all facets of your export
business. How would you answer the following questions?
(1) Have you selected a team of qualified export advisors? (accounting,
tax and customs advisor, attorney, freight forwarder, banker)
(2) Have you developed a master international marketing plan?
(3) Do you have long-term commitment by top management to overcome the
initial difficulties and financial requirements of exporting?
(4) Have you carefully selected your Japanese distribution channel?
(5) Have you researched the markets in one or two geographic areas in which
to concentrate your initial export efforts?
(6) Have you considered the international market potential for each of your
products?
(7) Do you intend to treat your Japanese distributors on an equal basis
with their domestic counterparts?
(8) Have you considered the Japanese market separately in designing your
marketplace techniques?
(9) Are you willing to modify products to meet Japanese regulations and/or
cultural preferences?
(10) Will you print service, sale, and warranty messages in the Japanese
language?
(11) Are you prepared to provide readily available after-sales service for
the product?
(12) Do you understand Japanese laws, culture, and business practices?
(13) Are you prepared to file your patent and trademark applications in
Japan?
If you answered "yes" to each of these questions, you should avoid the most
common mistakes of potential exporters.
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This file extracted from Dept. of Commerce National Trade Data Bank (NTDB)
CD-ROM SuDoc No. C 1.88:993/12. Processed 12/01/1994 by software developed
by RCM (UM-St. Louis Libraries) / OBR_0018